Shares of Williams-Sonoma (NYSE:WSM) received an upgrade from Morgan Stanley analysts from Underweight to Equal-Weight, citing the company’s “underappreciated ability to hold its margin even in a weaker demand environment.”
The analysts also hiked the price target on WSM from $155 to $270 and raised the fiscal year 2024 and 2025 estimates.
“WSM appears to be past peak pain on top-line/margins, and we have a better appreciation for the business's ability to generate operating leverage against a tepid demand backdrop,” Morgan Stanely’s team wrote.
Particularly, analysts predict a positive shift in the Home Furnishings sector, expecting stability and growth after a decline. They expect that the category will see near-flat to mid-single-digit growth rates in 2024 and 2025, contrasting with a 5.5% decrease in 2023.
With EBIT margins projected to remain solid in the mid to high teens, a return to mid-single-digit growth in EBIT is seen as feasible.
Meanwhile, WSM was also upgraded at Goldman Sachs from Sell to Neutral. The banking giant’s analysts said the consumer retailer “has been able to sustain higher margins, and trends came in better than expected for both Q4 and guidance for 2024.”
Goldman also lifted the target price from $154 to $263.