Wayfair (NYSE:W) shares popped 7% Monday after JPMorgan double upgraded the furniture seller to overweight from underweight, citing improving market share trends.
“We are upgrading Wayfair to Overweight from Underweight given a positive shift in market share trends and management’s newfound commitment to controlling expenses/investments, which combined, should cause a significant inflection in earnings revisions from steeply negative over the past two years to positive, on top of still-attractive valuation,” JPMorgan said in a note.
Analyst Christopher Horvers and team said Wayfair remains structurally relevant in the home retailing industry with a leading online assortment and advantaged supply chain, while the market has shifted its view dramatically to the downside.
The view on Wayfair is that both a positive shift in market share trends and management’s newfound commitment to controlling expenses/investments should cause a significant inflection in earnings revisions from steeply negative over the past two years to positive.
“Additionally, over the next 3-5 years, W should outgrow the category given the longer-term shift towards online retailing and its advantaged assortment/supply chain as the largest scaled online specialty player in the industry.”
JPMorgan assigned a price target of $82 to Wayfair based on 0.7X EV/sales multiple, which is noted to below the pre-COVID average of 1.5x. The firm also noted that the PT is below $82, where W traded just prior to COVID.
W darted higher $8.95, or 19.1%, to $55.74 first thing Monday.