On Monday, Mizuho (NYSE:MFG) Securities reiterated its Outperform rating on Wayfair Inc . (NYSE:NYSE:W) with a steady price target of $60.00. The stock, which InvestingPro analysis suggests is currently undervalued, has seen a 9% decline over the past week amid market volatility.
The reaffirmation comes as Wayfair announced the immediate cessation of its operations in Germany, which will affect approximately 730 jobs, representing 3% of the company's global workforce. Analysts at Mizuho estimate that Germany contributed a low single-digit percentage to Wayfair's total revenues of $11.8 billion and active customer base, resulting in an annual adjusted EBITDA impact of less than $50 million.
The decision to exit the German market was anticipated by investors who had previously considered the possibility of Wayfair either leaving the challenging market or engaging in some form of divestiture. Given the complexities associated with separating a specific geographical segment from the broader European operations, an outright sale seemed unfeasible. With a current ratio of 0.84 and short-term obligations exceeding liquid assets, Mizuho analysts believe that any cost savings from the exit will be redirected to support Wayfair's core domestic operations.
Later today, Wayfair is scheduled to host a call for sell-side analysts. Preliminary interpretations suggest that industry demand may have remained subdued during and after the fourth quarter, reflecting ongoing challenges in the holiday period. While the company isn't currently profitable, InvestingPro data shows analysts expect profitability this year with a forecasted EPS of $0.43. Today's announcement also underscores the difficulties U.S.-based e-commerce operators face in penetrating overseas markets.
While Chewy (NYSE:CHWY) is expected to expand into Europe eventually, analysts see this move as still being several years away. For deeper insights into Wayfair's financial health and growth prospects, including 5 additional ProTips, check out the comprehensive Pro Research Report available on InvestingPro.
In other recent news, Wayfair has seen noteworthy developments in its business operations. BofA Securities has increased its price target for Wayfair stock to $51, maintaining a Neutral rating. This adjustment takes into account Wayfair's decision to exit the German market, a move that is not expected to immediately impact earnings. Wayfair's exit from the German market is part of a broader restructuring plan, impacting approximately 730 employees, with charges between $102 million and $111 million anticipated.
Piper Sandler has upgraded Wayfair, projecting potential sales growth in the Hardlines & Broadlines sector, giving it an "Overweight" rating with a price target of $58. Loop Capital also raised the share price target for Wayfair from $50 to $55, maintaining a hold rating, despite a reduction in the firm's forecast for Wayfair's fiscal year 2025 Adjusted EBITDA.
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