Wayfair (W 9.47%) reported third-quarter results earlier this week that crushed analyst expectations as consumers continue to buy home furnishing products online during the COVID-19 pandemic. Investors cheered the figures, which showed that repeat customers represented over 70% of total orders. Management is confident that the company can continue its growth trajectory even after the coronavirus crisis is in the rearview mirror.
Wall Street has been reacting to the results, with analysts releasing a slew of research notes and updated valuation estimates. Here's what investors need to know.
Word on the Street
For starters, here's a summary of analyst activity in the wake of the release:
- Deutsche Bank: Maintains buy rating, lowers price target from $350 to $325.
- Jefferies: Reiterates buy rating, tweaks price target from $363 to $360.
- Baird: Maintains neutral rating, drops price target from $315 to $305.
- Canaccord Genuity: Keeps buy rating, increases price target from $340 to $350.
- Stifel Nicolaus: Maintains sell rating, increases price target from $160 to $180.
- Raymond James: Reiterates market perform rating.
- Piper Sandler: Keeps overweight rating and assigns price target of $370.
- Goldman Sachs: Reiterates buy rating, reduces price target from $365 to $360.
- DA Davidson: Maintains neutral rating, increases price target from $260 to $280.
- JPMorgan: Reiterates underweight rating, adjusts price target from $200 to $209.
- Wedbush: Keeps outperform rating with $330 price target.
- UBS: Drops price target from $325 to $295.
- Truist Securities: Maintains hold rating with a price target of $315.
Analysts offered a variety of opinions regarding Wayfair's future prospects, as it remains unclear whether the shift in consumer discretionary purchasing behavior will persist after the coronavirus crisis ends.
"Excluding the impact of Way Day (which fell at the end of 3Q this year) net revenue growth moderated sequentially toward the back half of the quarter though growth remained well above pre-COVID levels," Stifel analyst Scott Devitt wrote in a research note to investors. "Demand has been robust across product sub-categories, and the top five best-selling categories this Way Day were the same top categories as on Way Day 2019."
"Following 3Q results, we are incrementally encouraged by the continued top line strength and various operational efficiencies driving strong EBITDA leverage," according to Raymond James analyst Aaron Kessler. He acknowledges that Wayfair has strong fundamentals but has concerns around the company's valuation.
Piper Sandler called the results "exceptionally strong" and suggested that margin expansion is becoming increasingly important to the investing thesis. Analyst Peter Keith believes that Wayfair is positioned for a strong 2021.
"Macro drivers remain solid into 2021, with consumers spending more on the home, shifting from smaller to larger purchases and housing strength further driving sales; additional fiscal stimulus could also further boost sales," according to Wedbush.
"We continue to find shares of Wayfair attractive even as pandemic-driven tailwinds begin to subside, with the company's years of logistics investments paving the way for operating leverage going forward," says Canaccord Genuity.
Jefferies analyst Jonathan Matuszewski argues that some investors are "seeing only half the story" if they're not fully appreciating the company's internal efforts to improve efficiency and bolster profitability.
DA Davidson analyst Tom Forte is impressed with the results, which showed Wayfair's international segment getting closer to breakeven adjusted EBITDA.
Deutsche Bank expects Wayfair to beat consensus estimates for the fourth quarter.