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Existing home sales in the US hit their lowest level in over 16 years this October. High mortgage rates and expensive home prices have made it difficult for people to move, which directly impacts companies like Wayfair that rely on new home purchases to drive sales of large furniture.
While Wayfair has recently been winning more of the market even when the industry is flat, a frozen housing market is a headwind. If fewer people are moving into new homes, there is less immediate need for the heavy furniture and decor that make up the core of Wayfair's business.
Source: Reuters
After Wayfair reported its November results, we updated our fair value. We moved our rating to Watch and raised our projections for cash flow after the company reached $331 million for the year. We added the company's new share buyback program and its costs for paying down debt early to what we track. We have also lowered our expectations for sales in the international business and the amount we expect customers to spend on each order.
Gordon Haskett changed its rating on Wayfair to buy after the company reported its strongest sales growth since the pandemic. The move reflects growing confidence that the retailer can continue to win customers even while the housing market is slow.
Other analysts have also been adjusting their expectations, bringing the average price target across all firms to about $128. This suggests that Wall Street sees more room for the stock to rise from its current level of roughly $115.
Source: Gordon Haskett
Wayfair grew its total revenue by nearly 10 percent compared to last year, led by a strong 11 percent jump in its U.S. business. The company now has 22.2 million active customers, showing it is successfully winning over shoppers from traditional furniture stores. This growth is a key sign that the business is recovering well after a volatile few years.
More importantly, the company is becoming more efficient as it scales. It reported $236 million in adjusted EBITDA, a measure of profit that excludes certain non-cash costs, which was significantly higher than the previous year. While the international business saw a slight dip in sales, the overall result shows that Wayfair's specialized delivery network for heavy furniture is helping it generate more cash as more people use the platform.
See the full quarter, and how our tracked metrics did
Source: 8-K filing
Mizuho Securities set its price target for the stock at $132. This is higher than the average analyst target of $116 and suggests the firm sees more room for the stock to rise from its current level of about $120. While a single price target change is routine, it shows some analysts are becoming more optimistic about the company's ability to grow its furniture sales. The stock has gained about 17 percent over the last month as it prepares to report its next round of financial results in early November.
Source: Mizuho Securities
Management has consistently set beatable targets and cleared them for seven straight quarters. This track record suggests the business is growing faster than their own conservative forecasts.
| Expectation | |
|---|---|
| EPS | $0.98 |
| Revenue | $3.63B |