Wayfair (NYSE:W) shares rose more than 4% intra-day today after Evercore ISI analysts upgraded the company to Outperform from In Line, setting a new price target of $80, up from $65.

The analysts believe Wayfair is positioned to gain market share in the recovering home furnishing sector. The analysts highlighted that Wayfair’s attractive risk/reward profile is bolstered by significant cost reductions, establishing a stable foundation for adjusted EBITDA and limiting downside while offering substantial upside as revenues resume growth. Notably, Wayfair’s high short interest and lack of participation in the anticipated housing recovery in the second half of 2024 underscore its potential for appreciation.

Wayfair’s strategic focus on core principles and approximately $2 billion in cost savings are expected to drive EBITDA margins to mid-single digits in 2024, even with a slight year-over-year revenue decline.

The analysts pointed out that the challenging phase of operational adjustments is behind, and Wayfair’s global market share of less than 2% suggests ample room for growth, with expansion into brick-and-mortar outlets poised to support this trajectory. The valuation, according to the analysts, undervalues Wayfair’s potential for margin expansion and offers a chance for significant market reevaluation in the near term.

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