Cowen Raises Price Target on Wayfair (W) Amid Solid Q3
Wayfair (NYSE: W) delivered 3Q15 revenue of $594MM, up 77% y/y, 13% above Consensus estimates, as revenue growth in the Direct Retail business accelerated for a third straight quarter driven by accelerated customer growth. Direct retail revenue of $545MM, +91% y/y, accelerated further versus 2Q’s +81% and 1Q's +64%.
Cowen analyst, John Blackledge, noted that drivers of strong growth included:
1) Ongoing Site improvements improving the buying experience
2) Rising brand awareness
3) Efficient Ad spend, as repeat customer growth remains elevated and are cheaper to reach than new customers.
Adj. EBITDA loss was ($1.4MM) vs. ($18.3MM) last year, better than Consensus ($13.4MM) estimate due to ad spend and overall opex leverage. EPS (Non GAAP) was ($0.09) vs. Cons ($0.24). FCF was $35.3MM vs. a ($23MM) last year.
W's customer count rose to 4.59MM, +61% y/y and +14% q/q (or +547k net adds q/q), as customer growth accelerated for a second consecutive quarter suggesting W's marketing efforts continue gaining traction.
Mgmt. reiterated LT customer TAM of 60MM. Repeat customers rate was ~55% vs. ~50% in 3Q14, suggesting improving lifetime value, while Rev/customer was $371, +8.5% y/y. Orders delivered were ~2.3MM (+77% y/y).
No change to Cowen's Outperform rating but Price Target goes to $61 from $55 on higher projected margins.
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Shares of Wayfair closed at $39.43 yesterday.