Bernstein upgrades Wayfair to Outperform, raises price target

Investing.com -- Bernstein upgraded Wayfair to Outperform from Market-Perform and raised its price target to $125 from $100, citing stronger revenue growth and improving operating leverage following the company's second-quarter results.

The new target implies about 24% upside from Wayfair's Aug. 13 closing price of $101.13.

The brokerage said Wayfair's U.S. business was delivering high-single-digit revenue growth despite a largely stagnant furniture market, supported by premium brands, stronger buyer growth and higher order volumes. Bernstein sees a path to 10% revenue growth in 2027 and 2028, above the 7% growth expected by the Street.

Bernstein also raised its 2027 and 2028 revenue estimates by 8% and now expects a roughly 10% revenue compound annual growth rate over the next two years. It expects Wayfair's adjusted EBITDA margins to improve by about 30-40 basis points from its previous estimates, with adjusted EBITDA estimates for 2027 and 2028 rising 13%.

The brokerage expects Wayfair's adjusted EBITDA to reach nearly $1.1 billion in 2027 and $1.3 billion in 2028, putting its estimates 4% and 9% above consensus, respectively. It said the company's ability to maintain a contribution margin above 15% while keeping fixed costs in check should provide significant operating leverage as revenue grows.

Bernstein said key risks include a slowdown in revenue growth, increased competition from Amazon and Walmart, further gross-margin pressure and the potential for artificial intelligence to disrupt online marketplaces.

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