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Wayfair (W) Stock Gains Near 3% on Stifel's Rating Upgrade

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On Friday, Stifel upgraded Wayfair Inc.’s (W - Free Report) rating from Hold to Buy. The company also raised its target price by 4% to $78 from $75.

Following the news, Wayfair’s shares inched up 2.99% in response, eventually closing at $69.2.

Shares of Wayfair have also been steadily treading higher on a year-to-date basis. The stock returned 97.4% compared with the industry’s gain of 47.8%.

Rating Rationale

Analysts at Stifel believe that this e-commerce player in the home goods market will witness strong growth in the near future. The analyst remains optimistic about the company’s investments in logistics, international expansion and technology.

In the logistics space, Wayfair has been making changes to its fulfillment model to deliver products faster. The company now has more than 7 million square feet of space (up from 1 million square feet in 2016) in the United States and Europe across its CastleGate facilities and WDN Consolidation Centers, which is huge.

Also, the company has been trying its best to improve strategies related to its international expansion.In this regard, Wayfair is building international infrastructure, expanding international supplier network and establishing brand presence in select countries.

Moreover, the analysts believe that the online penetration in countries like North America and Western Europe is meager, but these countries hold a huge opportunity. Therefore, with increasing shift to online purchases for home goods appliances, Wayfair is ought to gain in the coming days.

These efforts will help Wayfair in expanding its market share in the home goods market and better compete with the likes of Inc. (AMZN - Free Report) , traditional retailers and other online home platforms.

Second Quarter Earnings Results

Wayfairreported second quarter results on Aug 8.The company’s net revenues of $1.12 billion increased 16.9% sequentially and 42.7% year over year. Also, revenues slightly exceeded the Zacks Consensus Estimate of $1.19 billion.

Management remained optimistic about the robust growth in online shoppers and strength in the international markets. It is expected to further strengthen its foothold in Canada and the United Kingdom.

The company has also been witnessing strong growth across all its metrics. The percent of orders have increased steadily. In the last reported second quarter, 61.3% of orders were from repeat customers, up from 57.6% in the year-ago quarter. The increasing percentage of orders from repeat customers is a big positive for the company, as it incurs less of advertising cost to reactivate a previous customer. Also, active customers increased 43.1% year over year to 9.5 million.

Bottom Line

Wayfair is well positioned in the home furnishing retail market. We remain positive about the company’s market position, product selection, and expanding customer base.

Also, its high revenues and strong metrics growth is a big positive. We believe that the company is being driven by logistic and international expansion.

Wayfair Inc. Price and Consensus


Wayfair Inc. Price and Consensus | Wayfair Inc. Quote

Zacks Rank & Other Key Picks

Currently, Wayfair carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader technology sector are Lam Research Corporation (LRCX - Free Report) and Inc. (STMP - Free Report) , each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Lam Research delivered a positive earnings surprise of 4.44%, on average, in the trailing four quarters. Inc. delivered a positive earnings surprise of 30.64%, on average, in the trailing four quarters.

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