On Monday, JPMorgan (NYSE:JPM) updated its stance on Williams-Sonoma (NYSE:WSM), raising the price target to $145 from $136, while keeping a Neutral rating on the stock.
The firm adjusted its third-quarter comparable sales (comp) estimate to a decline of 4.1%, which is slightly more pessimistic than the consensus estimate of a 3.5% decline per Consensus Metrix, but more optimistic than buy-side expectations of a 5% drop.
Despite the lowered comp forecast, JPMorgan's earnings per share (EPS) prediction for Williams-Sonoma stands at $1.80, above the consensus of $1.77. The company had previously reported a 4% decrease in comparable sales for the first half of 2024. JPMorgan anticipates that some may expect Williams-Sonoma to adjust its sales outlook toward the lower end of the -3.0 to -5.5% comp range and for operating margins to be revised downward.
However, JPMorgan's forecast for the company's full-year 2024 operating margin is 17.9%, which is higher than Williams-Sonoma's own guidance of 17.4-17.8% and aligns with the higher end of market expectations. The analyst noted that despite the risks associated with sales, flowthrough, rising interest rates, and significant tariff exposure due to sourcing from China, there could be upside risk to the upcoming earnings report. This is particularly due to the Williams-Sonoma brand's increasing mix penetration leading into the holiday season, with Thanksgiving and Christmas approaching, and its history of strong comparable sales performance.
In conclusion, while JPMorgan acknowledges potential short-term positive developments for Williams-Sonoma, the firm maintains a medium-term Neutral stance on the stock. The new December 2025 price target of $145 is based on a 16x price-to-earnings (P/E) ratio and a 10x enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) multiple on JPMorgan's 2026 forecasts of $9.07 in EPS and $1.636 billion in EBITDA for Williams-Sonoma.
In other recent news, the company's third-quarter earnings are projected to be $1.79 per share, according to Telsey Advisory Group, a figure slightly higher than the FactSet consensus of $1.77. Despite the forecasted 3.3% decline in comparable sales, the company's diverse product range is believed to have been well-received by customers.
InvestingPro Insights
To complement JPMorgan's analysis, recent data from InvestingPro provides additional context for Williams-Sonoma's financial position. The company's P/E ratio stands at 15.89, which is relatively in line with JPMorgan's target valuation of 16x. This suggests that the current market valuation is not far from what analysts consider fair.
InvestingPro Tips highlight Williams-Sonoma's strong dividend history, having raised its dividend for 19 consecutive years. This consistent dividend growth, coupled with a current dividend yield of 1.75%, may appeal to income-focused investors. The company's ability to maintain dividend payments even in challenging retail environments speaks to its financial stability.
Another relevant InvestingPro Tip notes that Williams-Sonoma operates with a moderate level of debt, which could be reassuring given JPMorgan's concerns about rising interest rates. This moderate debt level may provide the company with financial flexibility as it navigates the current retail landscape.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips that could provide further insights into Williams-Sonoma's financial health and market position.
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