The Ratings Game: Wayfair’s customer base jumped ahead by 2 years during COVID, setting the retailer up for long-term growth: Truist

Truist analysts say the increase was owing to a number of factors including more repeat use of the site and lower customer acquisition costs.

Analysts also expect the company to make long-term margin gains as it continues to benefit from scale, merchandising and efficiencies.

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“While elevated buyer demand due to pandemic will likely settle down as the economy reopens, we believe the company is set to emerge stronger after solidifying its position as category leader in Home and an improvement in business underpinnings,” Truist wrote.

“We expect these gains to drive healthy sales growth and improving profitability over an extended period, supporting our bullish view on the stock.”

Certainly, Wayfair isn’t the only retailer to benefit from the dual trends of greater online shopping and spending on the home.

But there are concerns that business will slow considerably for some of these retailers and that comparable sales over coming quarters will be huge hurdles.

Still, some analysts are confident that Wayfair will continue to reap rewards even after some normalcy resumes.

“Wayfair has strong momentum as we head into a reopening, and we think
share gains are largely sticky,” wrote KeyBanc Capital Markets analysts led by Edward Yruma.

“COVID-19 has essentially pulled forward material new customer growth, and we think that W is now entering a slower growth, but potentially more profitable phase. Quarter-to-date trends remain solid, and we will continue to monitor wallet share shifts as reopening accelerates.”

KeyBanc rates Wayfair stock sector weight.

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JPMorgan analysts rate Wayfair stock underweight with a $ 232 price target, with analysts raising red flags about “decelerating sales trends” and a partial reversal of margin gains.

“We see moderating trends ahead for Wayfair and, like others in our coverage that benefited from trends during COVID pandemic, this is tough for the stock as Wayfair has re-rated and valuation is typically correlated highly to top-line momentum,” JPMorgan said.

“[A]s share of wallet normalizes and the boost from housing slows, competitors will likely have to promote and advertise more to hold share.”

Wayfair stock has surged 428.7% over the past year. The Amplify Online Retail ETF IBUY, +0.38% is up 172.5%. And the benchmark S&P 500 index SPX, -0.11% has gained 26.2%.