Wayfair's Better-Than-Expected Q1 Turns BofA Bullish

Wayfair Inc W first-quarter results affirm the company's status as a formidable player in the home goods space, according to Bank of America Merrill Lynch. 

The Analyst

BofA's Akshay Bhatia upgraded Wayfair from Neutral to Buy with a price target lifted from $90 to $95.

The Thesis

Wayfair's Q1 print Wednesday included multiple metrics and data points that confirm it has built a "solid scale" in the home goods category — and competitors will now have a "harder time knocking Wayfair off its perch," Bhatia said in a Wednesday upgrade note.

The company added 805,000 new customers in the quarter versus expectations of 743,000 to bring its total customer count to 11.8 million. Growth in orders delivered accelerated from 31 percent last quarter to 40 percent. Wayfair's repeat order rate accelerated from 62.4 percent to 64.3 percent.

Wayfair's second-quarter revenue guidance of $1.558 to $1.592 billion came in ahead of the Street's estimate of $1.492 billion, Bhatia said. The guidance also implies two-year stacked growth of 81-84 percent and an acceleration from 75 percent in the first quarter, the analyst said. 

Wayfair's P/S multiple is broadly correlated to forward revenue growth and is trading at just 0.8x forward, which is near the low end of its historical range of 0.6x to 1.6x. The case for buying the stock can now be made amid expectations for "steady incremental dollar growth," according to BofA. 

Price Action

Shares of Wayfair were trading higher by 13 percent early Thursday morning.

Related Links:

Morgan Stanley Says Wayfair Will Be Profitable, But Later Than Expected

Piper Jaffray Offers Investors 'Clarity' On Wayfair

Photo courtesy of Wayfair.