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The market is pricing in “more realistic long-term EBITDA margins (5%-7.5%).”
“We still have some concerns around the long-term health of the business, and at this point on a DCF basis.. In our view, the stock is now discounting a lower terminal EBITDA margin as signs the platform may be more transactional than loyalty-building grow, but assumptions may still be somewhat generous. At the current price, we believe the stock is embedding long-term EBITDA margins in the MSD to HSD range, but LSD to MSD may be more realistic if W has to push ad spend to retain transactions. While the bull/bear skew looks balanced here on a pure upside/downside basis (68% upside to our $180 bull case, 68% downside to our $34 bear case), we believe the bear case of a LSD EBITDA margin on a much slower growing topline is more likely than the bull case,” Gutman said in a client note.
Morgan Stanley’s analysis shows Wayfair’s “fair value” is closer to $90.00, which is roughly 15% lower compared to yesterday’s closing price of $106.60.
Wayfair stock price is down 3.3% in pre-open Wednesday.
By Senad Karaahmetovic
