Wayfair Shares Cut to Sell as Citi Calls Retailer 'Overvalued'

Wayfair shares are overvalued, according to a Citi analyst, who downgraded the online household-furnishings retailer to sell.
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Wayfair  (W) - Get Report may be benefitting from the shelter-in-place requirements driven by the coronavirus pandemic, but its shares are overvalued, according to a Citi analyst, who on Friday downgraded the the online-home-furnishings retailer to sell from neutral.

Shares of the Boston company at last check were down 1% to $171.22.

Wayfair shares had risen by a factor of more than 7 from March 19 through Thursday's close. They were up 91% in 2020 through Thursday.

Citi analyst Nicholas Jones, who raised his price target on Wayfair to $130 a share from $75, said in a note to clients that even though estimates moved higher on better-than-anticipated trends, the company's shares are overvalued. 

The analyst said that while Wayfair is seeing a near-term benefit from shelter-in-place and social-distancing measures, trends will revert to those of a pre-coronavirus environment.

Long term, Jones said the adoption of online channels will likely increase, but the cost to maintain order volume will also increase back to outbreak levels, pressuring Wayfair's profitability.

In April, Wayfair said that its revenue-growth rate doubled amid the coronavirus pandemic.

Shelter-in-place and social-distancing requirements have devastated most businesses, which have been forced to close or severely limit their services.

U.S. retail sales dropped a record 16.4% last month, a government report said Friday, almost double March's 8.7% decline, which was the steepest month-on-month drop since 1992 when record-keeping began. 

On Thursday Evercore ISIS analyst Oliver Wintermantel cut his rating on the company to in line from outperform. The analyst said the stock had moved far enough and that further upside will be challenging.

Last week, the company said its first-quarter net loss widened to $289.9 million, or $3.04 a share, from $200.4 million, or $2.20, in the year-earlier period. Adjusted losses came to $2.30 a share, beating the FactSet consensus calling for a loss of $2.60. 

Revenue totaled $2.33 billion, up from $1.94 billion a year earlier and ahead of the $2.31 billion FactSet consensus forecast.