The Only La-Z-Boy Bull Cuts His Rating Just in Time

(Bloomberg) -- The lone La-Z-Boy Inc. bull to catch the furniture retailer’s record run this week after quarterly results is finally calling it quits on his buy rating -- and the market is listening.

Keybanc’s Bradley Thomas was La-Z-Boy’s only analyst to hold a buy rating during the company’s latest five-day rally to all time highs while also holding the Street-high price target of $36. The gains themselves led to the view shift as Thomas cited the stock’s elevated valuation as a reason for the downgrade. Shares are giving up some of Wednesday’s 13 percent gain in morning trading, down as much as 8 percent -- its biggest decline in a year.

“We believe the risk/reward for shares is more balanced on a six-month time frame,” writes Thomas in an August 22 note. “We see organic sales moderating from 1Q, and incremental margin pressure in the quarters ahead.” Thomas goes on to discuss potential risks related to China tariffs that hinge on whether the furniture industry is provided exemptions.

Keybanc’s new rating ends a more than 7 year run with an equivalent of a buy, and puts Thomas inline with the other three La-Z-Boy analysts who hold the equivalent of neutral ratings. He also relinquishes the Street-high price target title to Sidoti analyst Anthony C. Lebiedzinski, who, despite his neutral rating, boosted his PT to $38 Wednesday.

Shares of La-Z-Boy are up 20 percent this year through Wednesday despite increasing competition from online retailers like Amazon.com Inc. and Wayfair Inc. Amazon made a big push into online furniture sales with the launch of two private-label brands in November. And Wayfair continues to gain traction from investors with shares up about 64 percent year to date.

Sidoti and Keybanc issued glowing assessments of La-Z-Boy’s recently announced acquisition of Joybird, an e-commerce retailer and manufacturer of upholstered furniture, a sign the company was seeking to broaden its appeal.

To contact the reporter on this story: Shelly Hagan in New York at shagan9@bloomberg.net

To contact the editors responsible for this story: Courtney Dentch at cdentch1@bloomberg.net, Brad Olesen, Will Daley

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