On Friday, Deutsche Bank updated its assessment of Wayfair (NYSE:W) shares, raising the online furniture retailer's price target to $83 from $79 and maintaining a Buy rating on the stock. The adjustment comes after the company's recent earnings report, which has given the bank increased confidence in Wayfair's financial outlook.
The bank's analyst cited Wayfair's recent cost-cutting measures as a significant factor contributing to an improved profit and loss statement. The analyst also expressed a strong belief in the company's ability to sustain mid-to-high-teens incremental margins. Moreover, a projected revenue growth rate in the mid-single-digit range for the fiscal year 2024 further underpins this positive outlook.
Despite potential fluctuations due to market pressures, the analyst pointed to Wayfair's upward revenue trajectory and consistent market share gains as reasons for upwardly revising revenue and adjusted EBITDA estimates for fiscal years 2024 and 2025.
These new estimates are approximately 3% and 4% higher for revenue, and about 4% and 5% higher for adjusted EBITDA, surpassing the consensus estimates by around 2% and 2% for revenue and approximately 8% and 6% for adjusted EBITDA.
The bank's report anticipates a robust adjusted EBITDA revision cycle for Wayfair in 2024. This sentiment is bolstered by the company's valuation, which Deutsche Bank considers to be undervalued at 11 times the 2025 adjusted EBITDA, especially in light of the expected compound annual growth rate of approximately 45% for adjusted EBITDA between 2023 and 2026.
InvestingPro Insights
Wayfair's recent performance and future outlook can be further understood through key metrics from InvestingPro. With a market capitalization of $6.99 billion, the company's valuation reflects its position in the market. Despite a negative P/E ratio of -9.33, indicating that the company has not been profitable over the last twelve months, there is a significant return of 87.41% over the last year, showcasing investor confidence in its growth potential. Additionally, the company's revenue stands at $12.0 billion, with a gross profit margin of 30.55%, suggesting that Wayfair is maintaining a healthy profit on its sales.
Two InvestingPro Tips that provide further context to the Deutsche Bank's analysis are the company's stock price movements, which have been quite volatile, and the fact that analysts predict the company will be profitable this year. These insights suggest that while investors may need to brace for short-term fluctuations, there is a positive outlook for profitability in the near future. For those looking for more in-depth analysis, InvestingPro offers additional tips for Wayfair, which can be accessed at https://www.investing.com/pro/W. Use the coupon code PRONEWS24 to get an extra 10% off a yearly or biyearly Pro and Pro+ subscription, and discover many more InvestingPro Tips that could guide your investment decisions.
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