Lovesac (LOVE) Target Cut by Canaccord, Analysts See 40% Upside

Lovesac (LOVE) Target Cut by Canaccord, Analysts See 40% Upside

Tue, September 15, 2026 at 7:50 PM GMT+3 4 min read

On September 10, Canaccord cut its price target for The Lovesac Company (NASDAQ:LOVE) from $22 to $20 but maintained its Buy rating on the stock. This update came after the company reported its financial results for the second quarter of fiscal 2027, which ended August 2, 2026.

Canaccord noted that the company's fiscal Q2 results were in line with expectations. Revenue and adjusted EBITDA were both within the company's guidance and close to consensus estimates. The company received $21 million in IEEPA tariff refunds, which helped lift gross margins and earnings above consensus.

The Lovesac Company (NASDAQ:LOVE) reported net sales 0.4% higher than the prior-year period. This slight increase was mainly driven by 14 net new showrooms, although this was partly offset by a 1.9% decline in omni-channel comparable net sales and the closure of the company's Best Buy shop-in-shop locations. During the quarter, the company opened five additional showrooms and closed two.

The company reported net income of $7.4 million in the second quarter, compared with a net loss of $6.7 million in the same period last year. Operating income also improved to $10.9 million from an operating loss of $8.8 million a year earlier.

Gross profit rose 21.7% year-over-year while gross margin expanded to 68.4% of net sales from 56.4%, an increase of 1,200 basis points. The improvement was largely driven by IEEPA tariff recoveries, which contributed 1,240 basis points to gross margin. Excluding those recoveries, gross margin was 56.0%, down 40 basis points from the prior-year period.

The headline profit improvement, however, was largely refund-driven. This suggests the underlying quarter was considerably weaker than the reported operating-income improvement implies.

Strong Premium Demand, But Growth Challenges Remain

The Lovesac Company (NASDAQ:LOVE) said demand among its premium customers remains healthy. The company's sales of configurations priced above $6,000 grew at a double-digit rate during the quarter despite facing a strong comparison from the prior year. This strong performance was supported by larger configurations, premium fabrics, and the company's latest innovations.

However, the company lowered its full-year sales and adjusted EBITDA outlook, even as reported net-income guidance increased because of the tariff refunds. The Lovesac Company (NASDAQ:LOVE) now expects net sales of $690 million to $710 million and net income of $14.5 million to $18.5 million. The company's management pointed to a more conservative approach because of product launch timing and the promotional environment.

The company is facing delays in launching new products. Key innovations are now expected to have a more meaningful impact in the fourth quarter rather than the third quarter, which creates some risk for near-term revenue growth.

What the Numbers Say

Hedge fund interest in the stock remained unchanged in recent quarters. According to Insider Monkey's database, 20 hedge funds held positions in The Lovesac Company (NASDAQ:LOVE) in the second quarter of 2026, the same number as in the first quarter.

Meanwhile, short interest stands at 21.93% of the company's float as of August 31. This indicates a notable level of bearish positioning in the stock.

Analysts remain more optimistic. As of September 11, The Lovesac Company (NASDAQ:LOVE) had a consensus Buy rating and a median 12-month price target of $20. This implies a potential upside of about 43.78% from the current stock price.

Overall, the company delivered a mixed performance, which was helped significantly by tariff refunds and continued demand from premium customers. However, the lower full-year outlook and delayed product launches could limit near-term growth. Future performance could depend on whether delayed product launches can produce the stronger fourth-quarter growth management is counting on.

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