Shares of Lumber Liquidators (LL) - Get Report , a retailer of hardwood flooring, were skyrocketing over 32% after the company reported stronger-than-expected second-quarter financial results. But analysts at Credit Suisse contend that the earnings beat isn't the only thing moving the stock.
"LL's stock move today reflects strong results, the importance of comps momentum at this stage of the story, and high short interest. This team also deserves credit for the progress to date," Credit Suisse analysts Seth Sigman and Kieran McGrath noted.
For its second quarter, Lumber Liquidators reported earnings of 16 cents per share, smashing the consensus for a loss of 6 cents. Revenue came in at $263.5 million, topping estimates for $256.9 million. Gross margins rose to 37% from 29.7% a year ago.
Despite the blowout results, Credit Suisse takes a cautious outlook on the company.
"We continue to believe this stock is more than reflecting the turnaround at this point, keeping us on the sidelines," the analysts wrote. "In the low $30's, we believe this stock is already embedding $2+ of long-term EPS power (assuming a 20x P/E on long-term EPS, discounted back). Key risks include the remaining unresolved court case and a slower improvement in consumer sentiment."
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