Citi Upgrades Wayfair To Buy, Cites Near-Term Opportunities Ahead

• The share price of Wayfair Inc (NYSE: W) has surged 70.67 percent over the past one year, from a low of $19.12 on January 29, 2015.
• Citi’s Mark May has upgraded the rating on the company from Neutral to Buy, with a price target of $51.
• May cited six reasons for the upgrade, including the recent share price performance, which creates a favorable opportunity for the near term.

Analyst Mark May mentioned that Wayfair Inc posted "beat and raise" quarters for the five quarters since its IPO, and the trend is expected to continue in 4Q15, the results for which are likely in early March.

May explained that this expectation was based on Wayfair benefiting from “underappreciated seasonal strength.”

Related Link: Wayfair.com Launches One-Stop Flooring Shop

According to the Citi report, “The key point of the bear thesis is W’s business model and ability to generate profits, and we now forecast the company hitting a milestone in 4Q15 – positive EBITDA and FCF – ahead of the consensus timeline, and for profitability to improve in CY16.”

May also stated that Wayfair has exhibited better than expected marketing leverage and repeat customer behavior, which provides confidence regarding the company’s long term margin targets.

The company is expected generate revenue of $2.2 billion in CY15, reflecting 69 percent growth year on year, driven by 65 percent growth in customers, 6 percent growth in average orders per customer and 5 percent growth in AOV.

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