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Wayfair Inc. stock has jumped more than 16% for the week, but analysts warn the online home retailer’s first-quarter earnings scheduled for Thursday will show it has been a period of performance declines.
“Wayfair had to contend with a shift away from the online channel last year. Now, it has to deal with a slowdown in the category,” wrote UBS analysts in a note.
“It had a slow start to 1Q and we believe its trends decelerated further as the period progressed.”
UBS slashed its price target for Wayfair
W,
to $90 from $135. Analysts maintained their neutral stock rating.
The FactSet consensus is for sales of $2.998 billion, down from $3.478 billion last year. FactSet is guiding for Wayfair to swing to a loss of $1.56 per share after posting a profit of $1.00 per share last year.
The stock has tumbled 35.2% over the last three months.
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“[W]e believe the market will look to get a better understanding on when its realistic to expect Wayfair’s top-line to start growing again,” UBS said.
Truist Securities maintained its buy stock rating for Wayfair and $190 price target, but was cautious in its pre-earnings assessment.
“We expect soft 1Q performance, with inflationary trends and increase in consumer spending on experiential categories (travel, entertainment) posing a challenge to near-term growth. Growth in head count and wages is likely to weigh on margins as well,” analysts said.
“We view Wayfair’s broad/deep product selection, large customer base, high repeat usage and proprietary logistics network as inherent strengths for the business, which should help cushion the near-term impact and drive profitable growth with share gains over the medium- to long-term.”
Wayfair hosted its annual Way Day shopping event on April 27 and April 28. Data furnished by market research company YipitData showed seasonal strength in the outdoor category for the week of April 24.
But UBS says its “checks indicate a broad-based slowdown in furniture trends in March.”
Truist says Way Day should help in the second quarter.
“We’ve also observed recent encouraging commentary from Overstock, which indicated that the demand backdrop in April improved relative to March, which could bode well for Wayfair and the home category,” Truist wrote.
“That said, it is worth noting that a colder than expected Spring could impact the outdoor furnishings business for Wayfair as well.”
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Last Thursday, Overstock
OSTK,
reported first-quarter net income of $10.1 million, or 21 cents per share, down from $16.1 million, or 33 cents per share last year. Revenue of $536.0 million was down from $659.9 million the year before.
The FactSet consensus was for EPS of 23 cents and revenue of $576.7 million.
“[A]fter two years of pent-up demand, consumers are spending at higher levels of travel, dining and entertainment,” said Overstock Chief Executive Jonathan Johnson on the earnings call last week, according to a FactSet transcript.
“Over the near term, a challenging macro environment could continue to drive volatility and performance as we experienced in the first quarter.”
Still, Johnson said that “over time” the company expects “consumer spending will return to a more normalized mix of goods and services.”
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