Buckingham Pounds Table On Wayfair, Initiates At Buy With 28% Upside

Wayfair Inc. (NYSE: W) reported $800M in revenues for FY15 and more than 4M in new active customers. Buckingham’s Kelly Halsor initiated coverage of the company with a Buy rating and a price target of $52.

While the overall industry is growing at 2.5 percent per annum, industry sales of online home goods are growing at 15 percent, and are expected to contribute most of growth over the next five years, analyst Kelly Halsor said.

Strong Positioning And Strengths

Hasor believes that Wayfair is well positioned to deliver “outsized revenue growth, EBITDA dollar and margin expansion and improved FCF” over the next several years, as it capitalizes on growing brand awareness, a differentiated supply chain and structural and demographic tailwinds.

A proprietary large parcel delivery network and strong relationship with suppliers has allowed Wayfair to focus on industry leading delivery speed. The analyst mentioned that Wayfair’s long-term competitive advantage cannot be easily replicated by even the biggest of online retailers, making the company an attractive potential acquisition candidate for bigger online competitors.

“[O]ur current PT is supported by our FY20 outlook for $9.5B in rev and a 4% EBITDA margin, well below the company's LT goal to reach an EBITDA margin of 8% - 10%, suggesting further potential upside to our current PT,” Hasor wrote.