Loop Capital Downgrades Wayfair (W) to Sell, 'we see risk-reward unfavorably balanced'

Loop Capital analyst Laura Champine downgraded Wayfair (NYSE: W) from Hold to Sell with a price target of $35.00.

The analyst comments "We are downgrading our rating on Wayfair from Hold to Sell while maintaining our $35 price target. The PT is based on the longer-term estimates in our discounted NOPAT model. Though our flat sales estimate for 2025 is in line with consensus, we're $70MM below the consensus sales estimate for next year. The stock rallied 20% Monday after China tariffs were cut from 145% to 30%, effective today for a 90-day period. Our downgrade is driven by uncertainty related to tariffs. We think the market is pricing in a much lower tariff for Vietnam than the original "reciprocal" rate of 46%, and most investors we speak with believe the rate will be well below the China rate - now 30%. There is so much uncertainty around tariffs that we would avoid Wayfair's stock. We expect Wayfair to carefully manage overhead costs as we wait for a recovery. That said, we think Wayfair management has left investors with an unreasonable view as to potential inflation and supply issues we think the company is likely to face. On its May 1 earnings call and a competitor's conference yesterday, W mentioned that suppliers are holding price as they compete for market share. We think this stance, assuming it is as widespread as W has implied, is unsustainable even at lower tariff levels. Wayfair's stock is -12% YTD in a flat market, but we see further downside risk following the recent pop in the stock. Wayfair's long-term debt grew slightly in Q1, and the company is not in a position to deleverage its balance sheet. It's unclear to us when home furnishings will be a growth industry again, but at this share price we see risk-reward unfavorably balanced."

For an analyst ratings summary and ratings history on Wayfair click here. For more ratings news on Wayfair click here.

Shares of Wayfair closed at $39.01 yesterday.

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