Wayfair (W) Stock Slips as Jefferies Downgrades to Hold on Supply Chain Fears

October 13, 2021 9:27 AM EDT
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Price: $233.13 -1.22%

Rating Summary:
    22 Buy, 17 Hold, 4 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 8 | Down: 12 | New: 18
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Jefferies analyst Jonathan Matuszewski downgraded shares of Mayfair (NYSE: W) to Hold from Buy with a price target of $225.00 per share (down from the prior $330.00).

At the core of Matuszewski’s call is the belief that 2H Street estimates are too high amid a challenging supply chain environment.

“Population demographics & suburban migration will fuel category growth, but we see a tactical opportunity for investors to avoid an 'airpocket' where demand falls shy of high expectations and rising costs mute profits. Shares are >30% off highs, but soft data isn't priced in yet,” the analyst said in a client note.

Moreover, the data showed that Q3 global web traffic deteriorated in September vs July.

“This is concerning given mgmt's QTD gross revenue guide on 8/5 was 'negative high-teens', yet the Street is modeling a seq. improvement to (14%). Plus, underperformance of higher-margin Specialty brands worsened in 3Q. Share of voice is higher y/y, but we're surprised to see no seq. improvement into 3Q. Surely, the COVID customer cohort will be beneficial for Wayfair medium-term, though Sept. data shows the highest ratio of new web visitors vs. returning visitors, which we view as alarming from an ad spend perspective,” Matuszewski added.

In addition to the soft Q3, the start of the Q4 doesn’t look great as well. This quarter’s gross revenues are “similar” to July despite easier comps. Hence, the analyst believes the Street's +2% est. for 4Q sales is high.

Shares of Wayfair closed at $234.27 yesterday and are down nearly 1% YTD.



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