Skip to main content

Market Overview

Wayfair's Near-Term Recovery 'Not In Sight,' Morgan Stanley Says In Downgrade

Wayfair's Near-Term Recovery 'Not In Sight,' Morgan Stanley Says In Downgrade

Morgan Stanley turned bearish on online furniture retailer Wayfair Inc (NYSE: W) as any signs of a turnaround are "not in sight."

The Wayfair Analyst

Simeon Gutman downgraded Wayfair from Equal-Weight to Underweight with a price target lowered from $75 to $65.

The Wayfair Thesis

Investor sentiment is calling for Wayfair to show a stabilization of revenue trends in 2020 while also demonstrating a quick path to profitability than expected, Gutman wrote in the note. However, Morgan Stanley's first-hand checks point to an ongoing deceleration of revenue growth and rising macro headwinds.

Specifically, Wayfair started off 2019 with a 40% revenue growth rate but likely exited the year at less than 25% based on conversations with suppliers. The analyst said the slowdown in sales is broad-based and not exclusive to Chinese-made products impacted by tariffs.

Meanwhile, Gutman says Wayfair has among the biggest exposure to China and the coronavirus as around 80% of its cost of goods sold (COGS) are sourced from China. As such, the company could face "significant disruption" to its supply chain if the virus continues to impact manufacturing. Under a worst-case scenario, Wayfair could face "widespread out-of-stocks" at a time when the market is expected a re-acceleration of growth.

Finally, total advertising spending in the U.S. is expected to grow by 7% in 2020 as all companies look to take advantage of the Summer Olympics and U.S. Presidential election. In Wayfair's case, the company could end p with a return on investment short of expectations due to high ad costs.

W Price Action

Shares of Wayfair were trading lower by 6% to $75.40 at time of publication.

Related Links:

KeyBanc On Wayfair: Powerful Consumer Offering, But Profitability Elusive

Analyst: Amazon, Wayfair Big Winners From Impressive Online Holiday Sales Growth

Latest Ratings for W

Feb 2021Morgan StanleyUpgradesUnderweightEqual-Weight
Feb 2021Credit SuisseMaintainsOutperform
Feb 2021Cowen & Co.MaintainsOutperform

View More Analyst Ratings for W
View the Latest Analyst Ratings


Related Articles (W)

View Comments and Join the Discussion!

Posted-In: Coronavirus Furniture Morgan Stanley Simeon GutmanAnalyst Color Downgrades Price Target Analyst Ratings Best of Benzinga

Latest Ratings

IRIXRoth CapitalMaintains9.0
AMRSRoth CapitalMaintains33.0
VORBarclaysInitiates Coverage On56.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Everything you need to know about the latest SPAC news.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at