It’s been a sad week for Wayfair Inc. (NYSE:W), who’ve watched their investment drop 16% to US$63.21 in the week since the company reported its full-year result. Revenues came in at US$9.1b, in line with forecasts and the company reported a statutory loss of US$10.68 per share, roughly in line with expectations. This is an important time for investors, as they can track a company’s performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Following the latest results, Wayfair’s 24 analysts are now forecasting revenues of US$10.8b in 2020. This would be a solid 18% improvement in sales compared to the last 12 months. Statutory losses are expected to reduce, shrinking 14% from last year to US$12.13. Before this latest report, the consensus had been expecting revenues of US$11.7b and US$12.01 per share in losses. While revenue forecasts have been revised downwards, analysts look to have become more optimistic on the company’s earnings power, given the to earnings per share forecasts.
The average analyst price target fell 19% to US$84.00, with analysts clearly concerned about the weaker revenue outlook and expectation of ongoing losses. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company’s valuation. The most optimistic Wayfair analyst has a price target of US$138 per share, while the most pessimistic values it at US$45.00. With such a wide range in price targets, analysts are almost certainly baking in outcomes as diverse as total success and probable failure in the underlying business. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Wayfair’s past performance and to peers in the same market. It’s pretty clear that analysts expect Wayfair’s revenue growth will slow down substantially, with revenues next year expected to grow 18%, compared to a historical growth rate of 34% over the past five years. Juxtapose this against the other companies in the market with analyst coverage, which are forecast to grow their revenues (in aggregate) 16% next year. So it’s pretty clear that, while Wayfair’s revenue growth is expected to slow, it’s expected to grow roughly in line with the industry.
The Bottom Line
The most important thing to take away is that analysts increased their loss per share estimates for next year. Analysts also downgraded their revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as the wider market. Analysts also downgraded their price target, suggesting that the latest news has led analysts to become more pessimistic about the intrinsic value of the business.
Still, the long-term prospects of the business are much more relevant than next year’s earnings. We have forecasts for Wayfair going out to 2024, and you can see them free on our platform here.
You can also view our analysis of Wayfair’s balance sheet, and whether we think Wayfair is carrying too much debt, for free on our platform here.
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