-- Wayfair (W) remains a long-term share gainer, with improving earnings quality & cash generation amid a temporary delay in replacement upcycle, Morgan Stanley said in a Thursday note.
The report said its Q1 results were a "relief" after the stock's recent valuation de-rating was pricing in a deceleration in revenue to a low-single digit percentage growth.
The note said topline growth remained robust through Q1, and adjusted EBITDA margin came in ahead of consensus.
Cash generation continued to improve, with free cash flow reaching the highest level since mid-'21, underscoring the firm's improving earnings quality, the note added.
"At current levels, upside optionality remains, outweighing downside risk," the report said.
Wayfair continues to deliver a mid-single-digit percentage topline growth, mid-teens incremental margins and rising cash flow conversion, while retaining favorable gearing to a resumption of the furnishings replacement cycle, it added.
Morgan Stanley cut its price target to $110 from $128 while maintaining its overweight rating.
Price: $65.51, Change: $+1.58, Percent Change: +2.47%