What Happened?
Shares of furniture company Lovesac (NASDAQ: LOVE) fell 9.4% in the afternoon session after it reported disappointing third-quarter results and issued a weak outlook for the crucial holiday shopping season. The furniture retailer’s sales were flat year-over-year at $150.2 million, falling short of analyst estimates. The company also posted a wider-than-expected loss of $0.72 per share, as its net loss more than doubled from the same period in the previous year. Profitability worsened, with the operating margin contracting to negative 10.5% from negative 5.2% a year ago, as expenses grew relative to sales. Looking ahead, Lovesac’s revenue forecast for the fourth quarter came in below market expectations, and its full-year guidance for earnings and EBITDA also missed Wall Street's projections.
The shares closed the day at $12.63, down 8.1% from previous close.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Lovesac? Access our full analysis report here.
What Is The Market Telling Us
Lovesac’s shares are extremely volatile and have had 32 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 20 days ago when the stock gained 6.5% on the news that comments from a key Federal Reserve official bolstered hopes for an interest rate cut. New York Federal Reserve President John Williams stated he sees “room for a further adjustment” in the near term, sparking a significant market rally. Following his remarks, the probability of the central bank cutting rates at its December meeting jumped from 39% to over 73%, according to the CME FedWatch tool. This positive sentiment provided relief to markets amid concerns over high valuations, particularly in AI-related stocks.
Lovesac is down 47.2% since the beginning of the year, and at $12.63 per share, it is trading 66.5% below its 52-week high of $37.68 from December 2024. Investors who bought $1,000 worth of Lovesac’s shares 5 years ago would now be looking at an investment worth $326.31.
The 1999 book Gorilla Game predicted Microsoft and Apple would dominate tech before it happened. Its thesis? Identify the platform winners early. Today, enterprise software companies embedding generative AI are becoming the new gorillas. Click here for access to our special report that reveals one profitable leader already riding this wave.
