Unveiling Wayfair's $1.4B Efficiency Plan: Can New Cost-Cutting Strategies Pave The Way For Long-Term Gains?

Oppenheimer analyst Brian Nagel reiterated an Outperform rating on the shares of Wayfair Inc W and raised the price target from $70 to $100.

The analyst raised Q3 adjusted EBITDA forecast to $41.8 million (from $15.8 million) and introduced an initial 2025 adjusted EBITDA estimate of $700 million.

In January 2023, management updated its cost efficiency plan, detailing plans to lower annual operating costs by an estimated $1.4 billion.

Senior leadership indicated that cost-cutting efforts are now largely complete, with labor reductions driving approx. $750 million in annualized cost savings within SOTG&A, said the analyst.

In 2024 and 2025, the analyst expects free cash flow to inflect higher to $259 million and $444 million as topline trends continue to improve.

The analyst observed that Wayfair's ability to drive sustained positive free cash flow should give the company greater balance sheet flexibility going forward.

At current levels, shares of W trade at just 5x the analyst's intermediate-term EBITDA target of $1.9 billion.

In the analyst's view, at current still-depressed multiples, shares of Wayfair meaningfully under-appreciate continued recovery potential nearer term and substantial longer-term sales and profit opportunities for the company.

While risks for Wayfair persist, following aggressive strategic restructuring on the part of senior leadership, the company is much better positioned, both operationally and financially, said the analyst.

Price Action: W shares are trading higher by 0.33% at $69.93 on the last check Friday.