Arhaus performs successfully amid challenges
we underlined Arhaus (NASDAQ: ARHS) a few weeks ago as a recently floated stock that deserved a spot on your beautiful list. The company operates as a high-end home furnishings and decor retailer and its business appears to be strong. Now, after beating the consensus for Q3 results and guiding the market higher, this stock deserves a move from a “good” list to a shopping list. If what we are seeing is correct, this business is in the early stages of a hyper-growth spurt similar to what The Lovesac Company (NASDAQ: LOVE) do. With that in mind, we expect the third quarter results to repeat over and over again over the next few quarters or years and stock prices to maintain a long and lucrative rally.
Arhaus beats as supply chain catches up
Arhaus had an excellent quarter and a quarter that produced a silver lining for the economy at large. The revenue gains were supported not only by organic sales, but also by supply chain improvements which are reducing the backlog. The company reported net sales of $ 203.33 million, up 68.7% from a year ago and 100 basis points better than expected. The strength is driven by sales in showrooms and e-commerce, compounded by the increase in deliveries from previously written sales. On a comparative basis, sales are up 61% year-on-year and are made worse by the addition of several new locations in key markets.
Going down the report, the company saw a significant improvement in its margin due to the leverage of sales and lower interest charges compared to the previous year. The company’s net margin improved 700 basis points, Adjusted EBITDA improved 215% and net profit increased 1700% (no basis points) to push GAAP EPS higher. above Marketbeat.com consensus estimate. GAAP EPS of $ 0.13 broke $ 0.04 or 44% and this strength is also expected in Q4.
The company is steering Q4 revenue in a range of $ 205 to $ 215, an increase of 20 to 25% from last year. This compares to the Marketbeat.com consensus of $ 196 and there is upside risk in the numbers. The forecast calls for only a 6% sequential revenue increase, while other high-end surnames like The Lovesac Company expect much larger increases.
Analysts like Arhaus
Arhaus came to our attention when its post-IPO quiet period came to an end and 9 analysts on the sell side gave the stock what amounts to a strong buy rating. Marketbeat.com’s consensus on price targets has the stock trading near $ 15 and around 50% above current levels. No analysts changed their minds in the wake of the report, but Bank of America said it was impressed with them. In his view, there is a very good case for multiple price expansion and share price appreciation assuming the company can continue to operate as it has.
The technical outlook: Arhaus bounces back
Arhaus hit a low a few days before the results were released and the rebound is progressing in the wake. Now, with shares rising another 10%, it looks like a full reversal is in play that could bring the shares back to the $ 13 level. If the results for the next quarter come as we expected, we would expect this stock to reach new highs and double the historic high quite quickly.
Should you invest $ 1,000 in Arhaus now?
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