Despite Pandemic Gains Lapped, Wayfair Poised For Continued Top-Line Growth Through 2024, Predicts Analyst

Needham analyst Anna Andreeva reiterated a Buy rating on the shares of Wayfair Inc W with a price target of $100.

Wayfair's growth algorithm calls for double digit sales CAGR as it continues to take share in the $800 billion home space aided by Specialty Retail Brands and luxury brand growth, B2B, international expansion and physical retail, observed the analyst.

The analyst said that advertising accounted for 1% of sales in FY22 and is a key pillar of the go forward business model, which is expected to contribute 3-4% of sales and add 2-3 points to gross margin.

The U.K. and Germany combine to about half of the $320 billion - $350 billion TAM cited in Europe. 

According to the analyst, W has cut back on advertising recently to focus on paybacks and unit economics, marking a headwind to near-term growth but aiding sequential improvements in profitability and creating a stronger foundation for future growth.

While the timeline for reaching 10%+ EBITDA margins depends on sales, the analyst believes that if sales continue in the positive territory, W can get to mid-single-digit margins in '24.

The analyst thinks W's competitive edge in fulfillment through its own purpose-built global logistics network is an under-appreciated asset of the model.

The analyst concluded that while the home furnishings industry remains macro-dependent, with pandemic gains now largely lapped and stabilization underway, W should be well positioned to see top-line growth into 2H23 and '24.

Price Action: W shares are trading higher by 0.62% at $73.30 on the last check Friday.