BofA Downgrades Wayfair On Signs Of Deceleration

While Wayfair Inc’s W delivery execution and margin expansion has been impressive amid the COVID-19 outbreak, expectations and valuation are at historically high levels, according to BofA Securities.

The Wayfair Analyst: Justin Post downgraded Wayfair from Buy to Neutral, keeping the price target at $330.

The Wayfair Thesis: The company seems headed for a decline in revenues, which tends to expert pressure on the stock, Post said in the note.

Wayfair’s shares have been on an upturn so far this quarter, driven by expectations of upside to Street estimates. The analyst noted, however, that Bank of America’s aggregated credit and debit card data shows a meaningful deceleration in Online Home Furnishings spending growth from 68% in July to 49% in August, suggesting limited upside to the Street’s estimate of 58% growth for the third quarter.

The Bank of America data also indicates a slight recovery in Brick & Mortar Home Furnishings sales in the final two weeks of August.

See Also: BofA Says Overstock On 'Positive Trajectory,' But COVID-19 Muddies The Picture

Sensor Tower’s app download data indicates stalling momentum of Wayfair’s mobile app downloads, with a year-on-year decline in August, “suggesting business trends could be returning to a more normalized state,” Post wrote in the note. “Another round of stimulus and Way Day in late September could fuel some short term acceleration, but tough comps loom in 2021."

W Price Action: Shares of Wayfair had declined by 5% to $261.57 at the time of publication Friday.