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Could Williams-Sonoma Be a $72 Stock?

By Rich Duprey - May 14, 2020 at 10:23AM

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Investors in the luxury home goods retailer could be in for high-end gains.

Although retailers and just about every other business in the market got doused with cold water yesterday after Federal Reserve Chairman Jerome Powell predicted a tough slog through a recession rather than a V-shaped recovery, Williams-Sonoma (WSM 1.20%) is still expected to see its stock soar 67% to $72 a share.

Barclays analyst Adrienne Yih maintained her overrating on the luxury home goods retailer, believing Williams-Sonoma should be able to capture greater e-commerce sales, and she gave a massive upgrade to her price target for the retailer, boosting it from her previous $48 per share level.

Williams-Sonoma pots and pans

Image source: Williams-Sonoma.

A connection with the consumer

Williams-Sonoma has a history of strong e-commerce growth, and in its fiscal fourth quarter recorded double-digit gains in traffic, revenue, and new customers. For the year, the home goods retailer saw e-commerce sales reach an all-time high, accounting for 56% of total revenue.

With consumers stuck at home, and perhaps for a while longer yet if the economy isn't expected to grow as fast as originally believed, Williams-Sonoma may be able to achieve even greater e-commerce sales.

Yih told clients in a research note that although sales and profit margins could come under pressure in the near term because all of its stores are closed, Williams-Sonoma says it will begin reopening where permitted beginning May 17. The retailer says it will maintain social distancing guidelines, limiting the number of customers in a store at any one time and implementing appointments for shopping.

Yih believes Williams-Sonoma's strong e-commerce capabilities will help blunt the worst of the damage while offering substantial growth potential.

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool recommends Williams-Sonoma. The Motley Fool has a disclosure policy.

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