# Wayfair is confident that sales momentum will outlast the pandemic but some analysts aren’t so sure

Among the reasons Saunders lists are the limited need for more
home office equipment once it’s been purchased; the diversion of spending from
other areas, like travel, where consumer cash would normally go; and the return
of shoppers to stores.

“[W]e estimate that 57% of American households have spent more on home products using money they’ve saved elsewhere,” Saunder wrote. “Once the pandemic ends and people have the option to resume other activities, this benefit will diminish.”

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JPMorgan analysts maintained their underweight stock rating for Wayfair shares, though they raised their price target to $209 from $200. The new target is about 22% below current levels.

“[W]e continue to expect a de-rating as trends continue to decelerate and Wayfair faces very difficult comparisons in April (like other COVID winners in our coverage),” analysts said.

“Moreover, profitability, while better than expected in 2020 on an underlying basis, peaked in 2Q and should be down in 2021.”

Wayfair swung to a profit in the third quarter with revenue exceeding last year and the FactSet consensus. The stock shot up 7.2% on Tuesday after the results were reported. On Wednesday, it pulled back 2.4% in afternoon trading.

“While it may be tempting to attribute the recent strength
of the category to so-called ‘COVID classes’ like home office furniture or
outdoor furniture and play sets, the reality is quite different,” said Niraj
Shah, chief executive of Wayfair on the Tuesday earnings call, according to a
FactSet transcript.

“Instead, we estimate that all of the other classes combined
have driven more than three-quarters of the growth we’ve experienced
year-to-date.”

Shah puts the total addressable market for the home category across North America and Europe at $800 billion, “split roughly evenly between the two.” Wayfair’s active customer count was up 51% year-over-year in the most recent quarter and, Shah said, “customers acquired during COVID still appear to look similar to other recent cohorts in terms of trends.”

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Even if they’re not as optimistic as Shah, some analysts are upbeat about Wayfair’s ability to hang on to these new customers.

“Wayfair remains a beneficiary of elevated demand for home
goods amid the pandemic, with its best-in-class online offering helping drive
outsized growth in new and repeat customer orders,” wrote Truist Securities.

“While we expect growth trends to normalize at some point in
2021, the shifted baseline for sales and the emergence of a sustainable
profitable margin structure should deliver growing profit dollars as the
business scales.”

Truist rates Wayfair stock hold with a $315 price target.

“Macro drivers remain solid into 2021, with consumers
spending more on the home, shifting from smaller to larger purchases and
housing strength further driving sales; additional fiscal stimulus could also
further boost sales,” said Wedbush in a note.

Wedbush rates Wayfair stock outperform with a $330 price
target.

And Canaccord Genuity thinks the retailer has another factor working in its favor.

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“We continue to find shares of Wayfair attractive even as
pandemic-driven tailwinds begin to subside, with the company’s years of
logistics investments paving the way for operating leverage going forward,”
analysts led by Maria Ripps wrote.

Canaccord Genuity rates Wayfair stock buy with a $350 price target.

Wayfair stock has soared 196.0% for the year to date, outpacing the Amplify Online Retail ETF
IBUY,
+2.81%,
which is up 85.1%, and the S&P 500 index
SPX,
+2.66%,
up 7.3% for the period.