Shares of online-based women’s fashion brand Lulu’s Fashion Lounge (NASDAQ:LVLU) have cracked about 66% in six months. Pressure on consumer spending due to high inflation and interest rates weighed on LVLU stock. While this penny stock lost substantial value, the uncertainty around the economic trajectory could continue to hurt its prospects, at least in the near future.
Factors to Impact LVLU’s Financials
The slowdown in consumer spending will likely hurt discretionary categories like apparel, which will weigh on the sales and earnings of LVLU.
Given the macro headwinds, LVLU’s sales fell about 1% in Q3. Meanwhile, its earnings plunged 75.9%.
The company will announce its Q4 financials on Tuesday, March 14. Analysts’ sales estimate reflects a further decline in sales compared to Q3.
Analysts expect Lulu’s Fashion to post revenues of $81.98 million, down from $105.28 million in the third quarter.
A decline in sales, supply chain pressures, and increased shipping costs could hurt LVLU’s margins and bottom line.
Wall Street expects LVLU to report a loss of $0.12 per share in Q4 compared to earnings of $0.05 per share in the prior-year quarter.
While LVLU’s sales and earnings will likely remain under pressure, its strong operational and customer metrics will likely limit the downside. For instance, its active customers and AOV (Average Order Value) continue to grow, which shows the resiliency of its brand. In Q3, LVLU’s AOV increased by 6.4%. Further, active customers stood at 3.2 million, up 29.2%.
What’s the Prediction for LVLU Stock?
LVLU stock has a Moderate Buy consensus rating based on two Buy and two Hold recommendations. Further, due to the price decline, analysts’ average price target of $4.33 implies 96.37% upside potential.
While analysts are cautiously optimistic about LVLU stock, hedge funds reduced their exposure. Overall, LVLU stock has an Underperform Smart Score of three on TipRanks.
Bottom Line
The ongoing macro headwinds and an Underperform Smart Score suggest that LVLU stock could remain under pressure in the short term. However, the strength in its operational and customer metrics is positive, which will likely support its long-term growth.
Thus, investors with an appetite for high risk and a long-term view could consider buying LVLU stock near its current levels. Further, investors can use TipRanks Penny Stocks Screener to find stocks more likely to beat the market averages.
