Williams-Sonoma Upgraded To Overweight At JP Morgan, Firm Thinks 26% Upside Is Possible

In a report published Wednesday, JP Morgan analyst Tami Zakaria upgraded the rating on Williams-Sonoma, Inc. WSM from Neutral to Overweight, while raising the price target from $81 to $103. The analyst said that the company’s visible near-term sales and earnings drivers, combined with longer-term growth prospects “differentiate it from most in our coverage.”

Zakaria noted that the upgrade was based on:

• Williams-Sonoma appears poised to achieve MSD comps “biased to the upside” over the next twelve months in view of “the combination of lapping the West Coast port disruption, merchandising efforts at the WS brand, and deliberate inventory investments into the holidays”
• There are share opportunities in the long term, since the US housing market was still-recovering and the company has a “best-in-retail ecommerce platform”, while there is also global growth potential
• The company may generate accelerating EPS growth over the next 12-24 months due to the combination of “comparing against the port pressure in 4Q15 to 2Q16 plus the arc of the company's investment cycle and margin initiatives”
• Strength of Williams-Sonoma’s numerous brands and faster growth of its highly profitable ecommerce business, which accounts for about 52 percent of sales, support a premium valuation

“We are increasing our price target to reflect both our more confident outlook and the roll forward of our target date to Dec 16 from Dec 15,” Zakaria added.