Why Wayfair Stock Soared This Week

For the second week in a row, Wayfair (W 7.05%) he seemed to be a stock market rock star. According to data compiled by S&P Global Market Intelligence, shares of the online furniture and home furnishings retailer were up nearly 15% this week through late Thursday night. An analyst recommendation upgrade provided much of that increase.

RH and Temu effects

Wayfair’s surge started earlier in the week. Before the market opens on Monday MizuhoDavid Bellinger reiterated his recommendation to outperform (i.e. buy) the company’s stock. Ditto for its price target of $65 per share.

Optimism was already in the air for Wayfair, thanks to news that broke the previous week about its fellow furniture retailer RHformerly known as Recovery Hardware. That Thursday after the market closed, RH delivered a very impressive set of second-quarter fundamentals that drove its share price higher; And Wayfair’s rose, mostly by association.

In his latest analysis of the company’s stock, Bellinger cited what we can call the “RH Effect” as a driver of Wayfair’s continued growth. However, he also pointed out that the Biden administration’s effort to reduce cheap imports from abroad, mainly by low-cost manufacturers in China, could bring benefits to Wayfair. In his view, that move is “a key positive for W in allaying at least some fears of increased competition/undercutting by Temu.”

Temu is the China-owned online discount retailer PDD Holdings which sells its wares in markets outside the large Asian country.

Rejecting the exception

This effort by President Biden and his team, if successful, will close a loophole that allows importers to sell goods to American customers without taxes and tariffs if a good is priced at $800 or less. This will certainly help Wayfair and RH and dozens of other domestic retail companies, although it’s difficult to gauge to what extent.