Morgan Stanley Says 'Heightened Uncertainty' A Key Theme In Slashing Lumber Liquidators

In a report published Monday, Morgan Stanley analyst Simeon Gutman downgraded shares of

to Equal-weight from Overweight while removing an $85 price target due to "heightened uncertainty." Gutman noted that if there were any prevailing quality issues in the company's supply chain (as suggested by Sunday's 60 Minutes report), it is assumed they were largely behind the company. The analyst added that the allegations are two to three years old and "much of what we heard last night was not new." In fact, Gutman argued in a note on November 4th that if Lumber Liquidators products were not in compliance with California regulations, the financial repercussions "seem manageable." The analyst also stated that the company "has significantly beefed up" its compliance knowing that its reputation has been on the line for some time. "After watching the 60 Minutes episode, we are concerned that quality issues may still exist," Gutman wrote. "We recognize we are reacting to one interpretation of the situation, one that is clearly being influenced by investors who have a stake in the outcome." Bottom line, Gutman wrote that "something would really have to be awry if there were still product quality issues, in our view." On the other hand, the analyst also wrote that the 60 Minutes piece may have suggested that certain legacy issues "may not have been fully resolved."