What happened
Shares of home-furnishings e-commerce company Wayfair (W -3.36%) were flying higher on Friday, one day after jumping as much as 16% higher. Yesterday, investors cheered earnings results early before the stock gave up all of its gains by the end of the day. Today, the company is scoring upgrades from analysts, sparking fresh gains. As of 12:30 p.m. EST, Wayfair stock was up 13%.
So what
According to The Fly, three different analysts weighed in on Wayfair's 2020 results this morning. Two of them raised their price targets for the stock. An analyst with Cowen raised their price target from $375 per share to $450 per share, representing a whopping 55% upside. Less enthusiastically, an analyst with D.A. Davidson raised their target from $280 per share to $326 per share.
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However, not everyone on Wall Street is bullish. A Deutsche Bank analyst actually lowered their price target for Wayfair stock from $325 per share to $295 share. However, while that's a lower target, it still represents upside from where the stock trades right now. Therefore, it seems this downgrade wasn't enough to dampen enthusiasm from the two upgrades, sending Wayfair stock up today.
Now what
Here we have price targets of $295, $326, and $450. What's an investor to do and how much should one expect from a Wayfair investment? As you can see, professional analysts are quite divided on the opportunity. It's a reminder that when it comes to price targets, there are always multiple opinions and viewpoints. Understanding diverse opinions can help you make better decisions as an investor -- after all, you are the one who will ultimately decide to buy Wayfair stock or not.
Rather than think about how much the stock will be a few months from now or a year from now, think in terms of the business. Here's an encouraging trend from Wayfair's fourth-quarter report that shouldn't be overlooked: Q4 revenue was up almost 45% year over year and repeat customers accounted for 72.5% of orders. And management estimates it's only captured 2% of its addressable market.
Putting these two things together, Wayfair has a small, loyal customer base driving revenue growth with a lot of room for future growth. When you think about it like this, it's easy to see why investors are bidding this growth stock higher today.
