Wayfair A Beneficiary Of At-Home Trend, BofA Says In Upgrade

While shares of Wayfair Inc W have declined by 58% from their 2019 high and are down 33% from January levels, the company’s renewed focus on profitability could drive multiple expansion over the next 12 months, according to BofA Securities.

The Wayfair Analyst

Justin Post upgraded Wayfair from Neutral to Buy and raised the price target from $89 to $103.

The Wayfair Thesis

Wayfair is a beneficiary of the shift to in-home consumer purchasing, Post said in the Tuesday note. (See his track record here.)

The company’s revenue growth has accelerated to 40%, possibly due to store closures and stockpiling by consumers, the analyst said. Although this acceleration may be temporary, Wayfair is well-positioned in the trend of offline disruption and online penetration, and the company faces easier comps in the second half of the year, he said. 

BofA raised its revenue growth expectations for the second quarter and fiscal 2020 from 14% to 24% and from 19% to 24%, respectively.

While the acceleration may be short-lived, management’s commentary on profitability “underlies long-term, structural changes in Wayfair’s approach that should lead to decreased cash burn,” Post said.

The analyst said he expects the company’s U.S. earnings to turn positive in 2021, reversing three years of declines.

W Price Action

Shares of Wayfair were trading 8.08% higher at $77.29 at the time of publication Tuesday. 

Photo courtesy of Wayfair.