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Wells Fargo Initiates Coverage on Williams-Sonoma with ‘Hold’ Rating


Jun. 18 2020, Published 10:44 a.m. ET

Today, Wells Fargo initiated its coverage on Williams-Sonoma (NYSE:WSM) with a “hold” rating. The firm gave a target price of $90 for the stock. The target price represents a 12-month return potential of 3.8% from its closing price on Wednesday. In his research note to clients, Zachary Fadem of Wells Fargo stated that although stores are reopening, Williams-Sonoma faces risks associated with execution amid the pandemic, as reported by The Fly. He said that the environment under which the company operates is very fluid. So, he prefers to wait for better entry levels.

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Other analysts’ recommendations for Williams-Sonoma

After Williams-Sonoma reported impressive first-quarter earnings on May 28, analysts turned bullish on the stock. Since May 28, Credit Suisse, Jefferies, RBC, Telsey Advisory Group, Stifel, UBS, Baird, J.P. Morgan, and Jefferies have all raised their target prices. As of today, analysts’ consensus target price was $77.19, which represents a fall of 10.9% from its current levels. Overall, Wall Street prefers a “hold” rating for the stock. Among the 23 analysts, 56.5% recommend a “hold,” 26.1% recommend a “buy,” and 17.4% recommend a “sell.”

Williams-Sonoma’s Q1 earnings were impressive

In the first quarter, Williams-Sonoma reported revenues of $1.24 billion, which beat analysts’ expectations of $1.08 billion. For the quarter, the company’s overall comparable brand revenue growth was 2.6% due to above-average comparable brand revenue growth in Pottery Barn Kids and Teen, Williams Sonoma, and West Elm. Amid the lockdown, the company’s e-commerce sales grew over 30%. The company’s adjusted earnings were strong at $0.74, which was higher than analysts’ expectations of $0.01.

YTD stock performance

Today, Williams-Sonoma was trading 2.0% lower. Weakness in the broader equity markets due to disappointing unemployment data dragged the stock down. Recently, the stock rallied due to a strong first-quarter performance. As of Wednesday, the company was trading 18.7% higher than when it reported its first-quarter earnings. So far this year, the company has returned 18% and outperformed the S&P 500 Index, which has declined by 3.6%. During the same period, RH (NYSE:RH), Home Depot (NYSE:HD), and Lowe’s (NYSE:LOW) have returned 17.9%, 14.9%, and 13.3%, respectively.

On Wednesday, Stifel raised its target prices for Home Depot and Lowe’s. Read Why Stifel Raised Price Target for Home Depot and Lowe’s? to learn more.


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