What happened

Shares of Wayfair (NYSE:W) gained today after the online home goods retailer got a bullish analyst note from Piper Sandler. As a result, the stock finished up 12.8% on Tuesday.

So what

Analyst Peter Keith of Piper Sandler lifted his price target on the stock from $220 to $225 and maintained his overweight rating, saying that channel checks revealed that online sales of home goods were steady or strengthening from April to May, a favorable sign for Wayfair since the company had already said sales surged in April.

A home office featuring two chairs and a desk

Image source: Wayfair.com.

Keith added that the pandemic has boosted Wayfair's customer acquisition and its standing with suppliers, and said the stock was "significantly undervalued for a high-growth, asset-light company that should be profitable going forward." 

Wayfair has been one of the biggest breakout stars of the last couple of months as the stock has rocketed more than 800% since its bottom in March. With stores closed and outside activities limited, Americans are spending more time investing in and upgrading their homes, and that includes shopping on Wayfair.

The company posted 20% revenue growth in the first quarter with a 29% increase in active customers, and it's seeing strong momentum into the second quarter as well. CEO Niraj Shah said: "The broader market disruption has highlighted the many differentiated advantages we have built as the e-commerce leader in Home over the last two decades. Millions of new shoppers have discovered Wayfair while they shelter in place at home, and we are seeing strong acceleration in new and repeat customer orders across almost all classes of goods and across all regions." 

Now what

With sales up 90% in the beginning of the second quarter, the company could be on pace to turn its first adjusted profit (the fast-growing e-commerce business has historically operated at a loss). Previously, management had said it was targeting to break even on an adjusted EBITDA basis. While the boom from the lockdown won't last forever, if Wayfair can keep these new customers, the company could finally be out of the red for good.


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