- KeyBanc analyst Bradley Thomas initiated coverage on Wayfair Inc W with a Sector Weight rating.
- The analyst said Wayfair, and the furniture and home furnishings industry, significantly benefitted from a pull-forward in demand during the pandemic, limited competition in 2020, government stimulus, and increased home-related spending.
- Looking to 2023, the analyst expects the furniture and home furnishings industries to remain weak and sees the risk of weakening consumer spending.
- While the analyst’s top-down view of the industry is negative, there are datapoints that are encouraging from Wayfair’s perspective.
- The analyst said that the company’s average ticket is lower than many competitors, suggesting less risk in a recession.
- Additionally, the analyst said trends have been getting less bad, with Wayfair reporting a sequential improvement in consolidated and U.S. sales performance during 3Q and an increase in sales over the all-important Thanksgiving weekend vs. the same period in 2021.
- Management is now focused on cost cuts to drive run-rate EBITDA positive in 2023.
- Also Read: Wayfair Plans To Slash 1,750 Jobs
- The analyst believes it is critical for W to show progress on its profitability as investors increasingly focus on businesses that generate positive EBITDA and Free Cash Flow.
- While there are risks that cost cuts could harm growth, the analyst is optimistic about the company’s expense opportunity should the company stay the course.
- Price Action: W shares are trading higher by 20.92% at $47.05 on the last check Friday.
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