On Wednesday, RBC (TSX:RY) Capital made adjustments to its financial outlook for Wayfair Inc (NYSE:W), a leading e-commerce company specializing in home goods. The price target was reduced to $61 from the previous $62, while the firm retained a Sector Perform rating on the stock.
The revision of the price target comes as RBC Capital revises its net sales growth estimates for the first and second quarters to -8.6% and -4.8%, respectively. These figures are a decrease from the previous estimates of -4.3% for the first quarter and -1.9% for the second quarter and are also below consensus estimates.
In line with these revised sales growth estimates, RBC Capital has adjusted its full-year estimate to -2.3%, which is a reduction from the prior estimate of -0.5% and below the consensus estimate of -0.3%. The firm anticipates a potential miss in Wayfair's performance, given that traffic trends have remained soft through late April.
Additionally, RBC Capital has increased its first-quarter selling, operations, technology, general and administrative (SOTG&A) expense estimate due to expected deleverage and severance costs ranging from $70 to $80 million. Conversely, the firm has reduced its advertising expense estimate, anticipating a pullback on low return on investment (ROI) initiatives. As a result, the adjusted EBITDA estimate for the first quarter has been cut by approximately 5%, now standing at $72 million versus the consensus estimate of $73 million.
The lowered price target of $61 is based on approximately 13 times the firm's fiscal year 2025 adjusted EBITDA estimate of $686 million, which is a slight decrease from the previous estimate of $695 million. Despite the potential for a miss in Wayfair's upcoming financial report, RBC Capital suggests that the current share price may already reflect these challenges.
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