Wayfair (W) - Get Report shares soared Tuesday after Piper Sandler analyst Peter Keith said the online home furnishings retailer is “significantly undervalued" for a "high-growth, asset-light company that should be profitable going forward.”
Wayfair reported revenue of $2.3 billion for the first quarter, up 19.8% year over year. But it registered a net loss of $285.87 million, or $3.04 a share, widening from $200.39 million, or $2.20 a share, a year earlier.
Keith has an overweight rating on Wayfair and raised his share-price target to $225 from $220.
He was unbowed by the 198% surge in Wayfair’s share price over the last three months.
When Amazon’s Ebitda swung to positive from negative in 2001, the valuation “quickly moved from 1 to 2 times enterprise value/sales,” Keith wrote in a commentary cited by Bloomberg. Keith said Wayfair now trades at about 1.3 times EV/sales.
Wayfair’s goal of 20% sales growth looks “easily attainable” after the huge shifts in consumer spending to both home goods and the online purchases, he said.
Keith’s analysis of data from suppliers and retailers showed “steady/strengthening” online sales of home furnishings sales last month, following a 90% boom in April.
The strong consumer buying of the last two months has “improved Wayfair’s standing with suppliers, and allowed for significant new customer acquisition,” Keith said.
Morningstar analyst Jaime Katz offers a mixed take on Wayfair, seeing “significant growth potential but also corresponding expenses to achieve market share gains,” she wrote in a report last month.
Wayfair shares recently traded at $188.91, up 13.04%.