On Thursday, TD Cowen maintained its optimistic stance on Williams-Sonoma (NYSE:WSM), elevating the home furnishings retailer's price target to $320 from the previous $260, while reaffirming an Outperform rating. The firm's analysis suggests that Williams-Sonoma's shares have the potential to continue their upward trajectory.
The revised price target is based on a 20 times multiple of the forecasted fiscal year 2025 earnings per share (EPS) of $15.80. TD Cowen's commentary highlights the company's ability to sustain mid-single-digit (MSD) revenue growth and a slight further margin expansion. These factors are anticipated to contribute to nearly $1 billion in annual free cash flow and support a return on invested capital (ROIC) exceeding 40%.
Williams-Sonoma's operational improvements during the pandemic have been significant, with an EBIT margin jump from 8.6% to over 16%. According to TD Cowen, this margin expansion seems to be structural rather than temporary, suggesting that the company may deserve a higher valuation as a result.
While acknowledging that Williams-Sonoma is not completely immune to revenue challenges and will need to mitigate share loss and return to growth, TD Cowen expresses confidence in the strength of the company's brands. The firm indicates less concern about the possibility of these objectives not being met, given Williams-Sonoma's demonstrated operational efficiency and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.