Wayfair Well Positioned To Garner Top Line Growth Into 2024, Says Analyst

Needham analyst Anna Andreeva reiterated a Buy rating on the shares of Wayfair Inc W with a price target of $70.
The management has called out seeing consistent seasonality QTD at "core U.S. Wayfair" based on '19. This suggests international has further deteriorated QTD on a y/y basis to down 40's levels never seen in this business, noted the analyst.
Similarly, 4Q22 was consistent with historical seasonality, orders increasing 25% and U.S. revenue +10%, both on a sequential basis.
If '19 were to hold, it would suggest U.S. sales +6% y/y in 2Q23, on a similar sequential decline internationally, W total 2Q23 sales would be in-line with current consensus (down 5% y/y), said the analyst.
The analyst expects Wayfair to reinvest most COGS savings in price to help drive about 100 basis points of gross margin expansion per quarter in '23.
The analyst said that a portion of labor reduction savings would come from the Customer Services & Merchant Fees line.
The analyst models positive EBITDA beginning in 3Q23 and full-year EBITDA margin of (0.1%), with upside possible on better top-line/improving macro, added the analyst.
The analyst thinks W's competitive edge in fulfillment through its own purpose-built global logistics network is an under-appreciated asset of the model. With supply chain constraints now easing, the analyst thinks the company is poised to drive utilization and hence profitability higher, especially now as the model is becoming more flexible given the current restructuring initiatives.
While the home furnishings industry remains macro dependent, with pandemic gains now largely lapped, assuming any stabilization in the category, with its #2 share of the space, W should be well positioned to see top-line growth into '24, said the analyst.
Price Action: W shares are trading lower by 5.32% at $36.25 on the last check Friday.

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