Strong Start for Fashion Retailer Lovisa, With Three Potential Catalysts Ahead
As a result of Lovisa's 28% share price gain since initiating in mid-April, we are downgrading our recommendation to Hold from Buy. We remain positive on the company overall and are confident it will report strong earnings, cash flow and will meet our forecast dividend yield. That move may have just been the first chapter for Lovisa, and we see three potential catalysts that could each be a trigger for an upgrade to our valuation and price target: 1) Confirmation of the timing and details surrounding the expected US and UK market entry which would allow us to include those regions in our base case scenario; 2) News of stronger than expected Australian like-for-like stores sales, which could translate into earnings out performance; and 3) The announcement of plans to enter a new region not previously announced, such as Europe, Japan or the Middle East, offering additional organic upside. Canaccord's updated research on Lovisa is available here: (VIEW LINK)
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