Morgan Stanley downgrades Williams-Sonoma, says inventory might fall one other 18% as demand for residence furnishings weakens
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Count on extra draw back forward for Williams-Sonoma ‘s inventory as demand for residence furnishings weakens in a troublesome macro setting, in response to Morgan Stanley. Analyst Simeon Gutman downgraded the inventory to underweight from equal weight, saying in a word to shoppers Monday. The analyst additionally slashed his worth goal on the inventory to $100 from $150. The brand new goal implies draw back of roughly 18% from Friday’s shut. “Earnings revisions might flip sharply adverse in ’23 because the impacts of reversion, recession & normalizing promotions seem underestimated, even on the inventory’s present discounted valuation,” Gutman stated, noting that he is modeling earnings per share for the 2024 fiscal yr 33% under consensus expectations. Earlier this month, Williams-Sonoma reported third-quarter gross sales and revenue that surpassed analyst expectations. Nonetheless, the corporate did not reiterate or replace its outlook for the 2024 fiscal yr, citing financial uncertainties forward. Going ahead, Gutman views a slew of macro-related points for Williams-Sonoma, anticipating residence furnishings to say no by 6% to 7%, discretionary spending to fall and deflation to return in 2023. Williams-Sonoma shares have fallen greater than 27% in 2022. “Although WSM’s higher-income buyer supplies some insulation, in mixture we predict these headwinds imply the class probably declines and comps ought to flip extra sharply adverse in ’23,” he stated. “The timing and magnitude of EPS cuts might be higher than anticipated, and valuation is prone to be pressured till there’s extra readability on the earnings/margin trough,” Gutman stated. — CNBC’s Michael Bloom contributed reporting
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