UPDATE: Bernstein Starts Wayfair (W) at Underperform
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Bernstein analyst Nikhil Devnani initiates coverage on Wayfair (NYSE: W) with a Underperform rating and a price target of $45.00.
The analyst comments "We are negative on the near-term outlook for the stock. We believe the pandemic pulled forward demand (low purchase frequency category) and growth is now challenged against these tough comps. The situation is exacerbated by the return to in-store shopping, macro headwinds, and supply chain challenges (Wayfair's model is at a disadvantage vs. peers). Revenue pressures are well understood at this point, however we believe that consensus EBITDA expectations are still too optimistic. Inflation is pressuring the gross margin and CAC is rising to new highs. The combination of rising CAC and market share erosion is concerning -- Wayfair has always spent a lot to acquire customers on the thesis that it was building a recurring relationship with that customer, but these factors are now moving in the opposite direction. There's a real risk that home goods eCommerce is structurally more competitive post-COVID. We are 20% below the Street on EBITDA dollars and 50-100bps below on the margin by 2024/25. While Wayfair's EV/Sales multiple (0.5x NTM Sales) screens as very inexpensive, a normalized EBTIDA lens shows that the stock still trades at a notable premium to peers (RH and WSM). Furthermore, Wayfair has the least amount of FCF support in our coverage, with cash burn expected to persist into 2023."
Shares of Wayfair closed at $51.42 yesterday.
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