Loop Capital Raises Wayfair Stock Target, Reiterates Stick to Estimates By Investing.com

On Monday, Loop Capital made an adjustment to its share price target for Wayfair (NYSE:W), raising it from $50 to $55 but maintaining a Hold rating on the stock. The stock is currently trading at $52.29 and InvestingPro’s analysis suggests the stock is fairly valued.

The decision comes despite a reduction in the company’s guidance for Wayfair’s adjusted EBITDA in fiscal 2025, with current EBITDA at -$314 million. According to Loop Capital, the updated price target is derived from long-term forecasts in their discounted NOPAT (net operating profit after tax) model.

The company’s analysts revised their revenue growth expectations for next year to 2% from 1%, expecting lower interest rates to help home sales.

With current annual revenue of $11.84 billion and a 1.22% decline in revenue over the trailing twelve months, this adjustment is focused on the second half of the fiscal year as revenue recorded a 3% decline in the third quarter of 2024, which was more than the expected 1% decline. Wayfair’s third-quarter adjusted EBITDA not only fell short of consensus, but also Loop Capital’s own estimates.

Wayfair’s management has committed to achieving adjusted EBITDA growth by 2025, but has made no commitments regarding margin expansion. Data from InvestingPro shows the company’s current gross profit margin stands at 30.2%, while analysts forecast profitability this year despite recent challenges.

With this in mind, Loop Capital has lowered its 2025 adjusted EBITDA guidance by approximately $120 million. Still, they expect a slight recovery in revenue in 2025, forecasting a 2% increase, compared to a 2% decline in 2024.

The analyst report also highlighted Wayfair’s stock performance, noting a decline of about 10% year-to-date, in contrast to the S&P 500’s 27% rise. The report addressed concerns about financing Wayfair’s growth through debt, particularly as the cost of debt has risen significantly. Wayfair recently secured $800 million at a 7.25% interest rate in the private debt market, in part to address upcoming convertible note maturities.

Loop Capital expressed uncertainty about when the home furnishings segment would return to being a GDP growth industry, but concluded that at the current share price, the risk-reward profile appears to be balanced.

In other recent news, Wayfair’s third-quarter financial report showed a 2% year-over-year decline in net sales to $11.84 billion, slightly better than expected. The company also reported a 6.1% decline in orders, offset by a 4.4% increase in average order value. Bernstein maintained a Market Perform rating on Wayfair shares, reflecting the company’s financial performance and current industry sentiment.

Wayfair’s fourth-quarter guidance calls for a low-single-digit year-over-year decline, while also forecasting an adjusted EBITDA margin between 2% and 4%. Given the company’s current gross profit margin of 30.2%, Bernstein believes this forecast is cautious.

Despite a decline in order growth and active customers, Wayfair’s financial health is rated “FAIR,” according to InvestingPro. The company also plans to increase advertising spending to 12% to 13% of revenue, reflecting the challenges of driving customer loyalty in a competitive market.

In other retail news, mattress and furniture retailers reported positive mid-single-digit year-over-year growth following the Black Friday sales weekend. Wayfair Inc (NYSE:). showed strong momentum, with Wayfair’s analyst consensus remaining cautiously optimistic despite some downward revisions to earnings expectations.

KeyBanc Capital Markets maintained its Sector Weight rating on Wayfair, recognizing the company’s ability to improve EBITDA and gain market share even as the industry faces headwinds. These are the latest developments in Wayfair’s business operations.

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