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Analysts Encouraged By Lumber Liquidators Legal Process

Jayson Derrick

Lumber Liquidators Holdings Inc (NYSE: LL) finalized a resolution with various U.S. government entities related to its sourcing of Chinese laminate flooring. As part of an agreement, the company will pay $33 million in fines and investors should be encouraged by the development but not necessarily buyers of the stock, according to two analysts.

The Analysts

Wedbush's Seth Basham maintains a Neutral rating on Lumber Liquidators with an unchanged $12 price target.

Raymond James' Budd Bugatch maintains at Market Perform.

Wedbush: Focus On The Core Story

Lumber Liquidators may be left with some small claims to resolve in the future, but Basham said Tuesday's settlement marks the last major legal overhang. The company will pay a "hefty" fee, which is more than previously expected although still manageable given an "ample" liquidity position of more than $40 million.

Lumber Liquidators will be left with sufficient liquidity to run the business as usual although with "more limited room for error," the analyst wrote. Both the company and investors can now focus solely on the core story and management has the opportunity to improve the business.

It needs to first find an acceptable balance between promotion and advertising in order to drive profitable sales growth.

Raymond James: 'Light At The End Of The Tunnel'

Investors can finally start to see the "light at the end of the tunnel" in regards to its legal troubles, Bugatch said in a research report. At the same time, there is less visibility around the company's core operating performance, especially at a time when new competitors have "complicated the runway" for Lumber Liquidators.

Given the removal of all notable legal overhangs, Bugatch said Lumber Liquidators' stock has now become "investible."

Price Action

Lumber Liquidators closed Wednesday down 1.3 percent at $10.93 per share.

Related Links:

Lumber Liquidators Agrees To M Penalty For Securities Fraud

Loop Capital Shelves Lumber Liquidators, Says Street Estimates Could Be Overly Optimistic

Photo credit: Dwight Burdette, Wikimedia

Latest Ratings for LL

Date Firm Action From To
Jan 2019 Loop Capital Downgrades Buy Hold
Oct 2018 Credit Suisse Maintains Neutral Neutral
Oct 2018 Morgan Stanley Maintains Equal-Weight Equal-Weight

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