Morgan Stanley’s Simeon Gutman defended his bullish rating for Wayfair (NYSE:W) as a cyclical recovery in home-oriented stocks coupled with Wayfair’s (W) improved market share opens the possibility for the company to achieve $900M of adjusted EBITDA in 2025.
Gutman has an Overweight rating on Wayfair (W) and a price target of $80 which is 26% above Friday’s closing price.
“Our Overweight rating is based on a very attractive risk/reward skew, with [Wayfair’s] cost discipline and ’24 EBITDA floor limiting downside while its significant torque in a recovery shapes the upside,” Gutman said in Monday’s research note, adding that while “the market is pricing in a cyclical recovery in home-oriented stocks, [Wayfair] does not seem to be receiving the same benefit of the doubt.”
Wayfair’s (W) Q1 2024 sales run rate indicating a modest deceleration from Q4 explains why the company has lagged the rest of the home-oriented group. But many retailers experienced similar sluggish sales in Q1. Accordingly, Morgan Stanley is forecasting “flattish” revenue for the Home Furnishings sector and 1% year-over-year growth for Wayfair’s FY24 revenue.
Assuming the home-furnishings category returns to ~5% growth in 2025 and the e-commerce channel grows 2x this rate, Morgan Stanley research shows Wayfair (W) could see its sales grow by double-digits, driving adjusted EBITDA to more than $900M on low-double-digit sales growth by 2025.
Analysts are largely bullish on Wayfair (W) with Seeking Alpha authors and Wall Street analysts rating the stock as a Buy. Seeking Alpha’s Quant Rating views Wayfair (W) with a Hold.
Wayfair (W) shares are up 2% on Monday.
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