MW Analysts don't budge on Williams-Sonoma ratings despite stock rally
By Steve Gelsi
After the retailer's stock hits an all-time high, analysts remained cautious
Analysts on Thursday remained wary of Williams-Sonoma's prospects despite a more bullish reaction by investors to the home-goods retailer's latest earnings update.
Williams-Sonoma Inc.'s stock (WSM) cooled after the opening Thursday, dropping 2.3%.
In the previous trading session, Williams-Sonoma rocketed 27.5% to an all-time high of $175.04 a share, after the company reported stronger-than-expected profit and revenue on the heels of gains in operating profit margin and market share.
Chief Executive Laura Jean Alber told analysts the company's prospects for the 2024 holiday season are strong.
"Our better-than-industry performance is a result of our focus on innovation from our products to our design services," Alber said, per a FactSet transcript. "We set ourselves apart from the competition with our unique in-house design capabilities and vertically integrated sourcing organization, which gives us the ability to offer high quality products at compelling price points."
Oppenheimer analyst Brian Nagel reiterated a perform rating on Williams-Sonoma and said the bounce in its share price reflects positive sentiment, not fundamentals of the business.
"In our view, yesterday's marked bounce in shares reflects downbeat near-term sentiment and is at odds with still soft...underlying sales trends at the company," Nagel said.
JPMorgan analyst Christopher Horvers reiterated a neutral rating and bumped up his price target on Williams-Sonoma to $153 a share from $145 a share.
"WSM continues to execute at a high level and we expect the broader home furnishings category to sequentially improve," Horvers said. "That said, we are approaching the intersection of when the company needs to drive sales ... while we believe the stock is expensive."
Wedbush analyst Seth Basham reiterated a neutral rating on Williams-Sonoma's stock and upped his price target to $175 a share from $135.
"As we look forward to 2025, encouraging top-line strength from new products (particularly at West Elm) should become more apparent as inventory levels for these products improve, but we remain guarded on the prospects for industry turnaround," Basham said.
Since Williams-Sonoma only gets about 50% of its sales from furniture, a rebound in the sector won't help it as much as other stocks such as Arhaus Inc. $(ARHS)$ and RH $(RH)$, Basham said.
"On the margin front, we still see diminishing returns from current initiatives while WSM's variable cost structure limits flowthrough once growth returns," Basham said. "These factors and an elevated valuation with shares currently trading at 21 times our fiscal year 2025 earnings per share estimate leave us sidelined."
-Steve Gelsi
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November 21, 2024 09:48 ET (14:48 GMT)
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