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Maxim Remains Bullish On Wayfair Amid 19% Decline Following Earnings Miss

Wayfair Inc W reported mixed 2Q results. Although the company faces tough comps ahead, the shares are “compelling,” Maxim’s Tom Forte said in a report. He maintained a Buy rating on Wayfair, while reducing the price target from $50 to $49.

Mixed Performance

Wayfair reported its quarterly total sales at $787 million, representing 60 percent growth and topping the consensus estimate of $782 million. Adjusted EBITDA loss came in at $25 million, worse than the consensus projection of $23 million. Adjusted EBITDA margin of -3.2 percent was also disappointing versus the consensus expectation of -2.9 percent. Adjusted loss per share of $0.43 was higher than the consensus estimate of $0.41.

Tougher Comps, Shares Compelling

Wayfair faced tougher comps in 2Q than it did in the previous quarter. “Additionally, looking ahead, the company faces even tougher comparisons, as it will lap 76.7% growth (approximately 1,000bps sequential improvement in sales growth) next quarter and 81.0% sales growth in 4Q16,” analyst Tom Forte wrote.

Forte reduced the sales estimates for 2016 and 2017 by 7 percent each to $3,448 million and $4,751 million, respectively. The adjusted EBITDA forecasts for the two years have been lowered from -$42 million to -$79 million and from $40 million to $19 million, respectively. The adjusted EPS estimates for 2016 and 2017 have been reduced from -$1.07 to -$1.55 and from $0.35 to $0.65, respectively.

“While cognizant of the fact that 2Q16 operating results and some of management's commentary provide ample ammunition for those bearish on the stock, we remain impressed by management's ability to take significant share in the home category, which we believe will continue, and we remain bullish on the shares,” the analyst commented.

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