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Is Williams-Sonoma an $80 Stock?

By Anders Bylund – May 18, 2020 at 11:49AM

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A bullish analyst note identifies the home goods retailer as a buy today, thanks to a promising shift in consumer spending patterns.

Analyst firm Wedbush Morgan upgraded Williams-Sonoma (WSM -2.73%) from a neutral rating to outperform on Monday, citing a long-lasting change in the home goods market that aligns with this company's product collections.

The upgrade

Seth Basham lifted his target price on the stock from $46 to $80 per share, 20% above Friday's closing price.

The firm noted that consumers are directing their discretionary spending budgets away from travel, apparel, and entertainment during the stay-at-home period of this coronavirus era. Instead, they're spending money on improving their homes with good-looking and functional furniture and home goods.

In the short term, Williams-Sonoma's rising online sales should balance out lower revenue from physical retail stores, Basham said. The "secular shift" toward online shopping for home goods will give Williams-Sonoma a tailwind for the long run as well.

A young woman smiles at her smartphone, holding a credit card in her other hand.

Image source: Getty Images.

The data behind the upgrade

The firm based this upgrade on promising reports from home-goods peers Purple Innovation (PRPL 2.30%) and Wayfair (W -3.67%), alongside data from several market reports in the online furniture retail space. Consumer interest in housewares and small kitchen appliances should fade out quickly but the idea of turning to online retailers for these items will remain.

E-commerce accounted for 56% of Williams-Sonoma's total sales in 2019, up from 54% in 2018 and 52% the year before that. That outsize proportion of online retail sales positions the company for success in a world where consumers are getting used to shopping on the internet.

Anders Bylund has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Wayfair. The Motley Fool recommends Williams-Sonoma. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Williams-Sonoma, Inc. Stock Quote
Williams-Sonoma, Inc.
WSM
$125.49 (-2.73%) $-3.52
Wayfair Inc. Stock Quote
Wayfair Inc.
W
$37.76 (-3.67%) $-1.44
Purple Innovation, Inc. Stock Quote
Purple Innovation, Inc.
PRPL
$4.00 (2.30%) $0.09

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