Lumber Liquidator's Stock Soars, But Analyst Cautions 'substantial Risk' Remains

Lumber Liquidators Holdings Inc.'s stock rocketed 22% in active afternoon trade Friday, putting it on track for the third-biggest one-day percentage gain in its history, as it extended the gains seen after the wood-flooring company announced a settlement with the Justice Department late Wednesday. Volume of about 10 million shares was nearly seven times the full-day average, according to FactSet. The stock surged 13% on Thursday, after the company agreed to pay $10 million in fines and agreed to plead guilty to violations of customs laws related to investigations that began in 2013. The violations were unrelated to allegations earlier this year that the company's wood flooring products sourced from China contained dangerous levels of a cancer-causing agent. Wedbush Securities analyst Seth Basham said in a recent note that while the settlement puts one major issue largely behind the company, "the company is not out of the woods yet, as the potential financial fallout from the issue with China-sourced wood flooring is still a "substantial risk," and because near-term trends "remain under severe pressure." What could be helping drive the recent stock gains, the latest data showed that short interest, or bearish bets on the stock, had nearly doubled over the last six months to the highest level in the stock's history. The stock is still down 70% year to date, while the S&P 500 has eased 2.4%.

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