Aaron's Analyst Says Partnership With Wayfair Could Add 4-27% To EPS

Channel checks conducted during the second quarter uncovered a partnership between Aaron's, Inc. AAN and Wayfair Inc W, according to KeyBanc Capital Markets.

The Analyst

Bradley Thomas maintained an Overweight rating on Aaron's and raised the price target from $72 to $75.

The Thesis

Recent check reveal that Progressive Leasing was added as a financing alternative on Wayfair’s site in April, Thomas said in a Sunday note. (See his track record here.)

Aaron's acquired the virtual lease-to-own company in 2014.

Although Wayfair’s proprietary credit card offering seems to remain the primary credit offering, Progressive has been embedded as a choice on each eligible item and at checkout, the analyst said. The new partnership with Wayfair could add 4-27 percent to Aaron's annualized EPS, he said. 

Thomas projects the partnership will be accretive at the lower end of this range initially and could grow to the high end or even exceed the estimate in the next three to four years, if Wayfair ramps like other furniture retailers.

KeyBanc raised its EPS estimate for 2020 from $4.50 to $4.55 to reflect the latest partnership with Wayfair and a growing partnership with Best Buy Co Inc BBY.

Aaron's continues to be “one of our favorite ideas, supported by the opportunity for national account roll-outs at Progressive," the analyst said. 

Price Action

Aaron's shares were up 4.77 percent at $58.43 at the time of publication Monday. 

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