KeyBanc has upgraded its rating on home furnishings retailer Williams-Sonoma (WSM, Financial) to Overweight, citing a compelling buying opportunity for long-term investors. The firm has set a price target of $181 for the stock, highlighting the significant upside potential over the next two to three years.
This revised outlook follows a recent decline in Williams-Sonoma's share price, which KeyBanc believes has created an attractive entry point for those willing to invest patiently. The company is recognized for its strong capabilities in managing short-term challenges, such as those arising from new tariff implementations.
Moreover, KeyBanc anticipates that Williams-Sonoma will gain from favorable changes in tax policies. An eventual revival in the housing market and increased expenditure on home-related items are expected to further bolster the company's growth trajectory. The financial institution suggests that investors should consider increasing their positions in this well-regarded business.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 18 analysts, the average target price for Williams-Sonoma Inc (WSM, Financial) is $180.59 with a high estimate of $280.00 and a low estimate of $127.67. The average target implies an upside of 19.28% from the current price of $151.40. More detailed estimate data can be found on the Williams-Sonoma Inc (WSM) Forecast page.
Based on the consensus recommendation from 25 brokerage firms, Williams-Sonoma Inc's (WSM, Financial) average brokerage recommendation is currently 2.7, indicating "Hold" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Williams-Sonoma Inc (WSM, Financial) in one year is $81.21, suggesting a downside of 46.36% from the current price of $151.4. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Williams-Sonoma Inc (WSM) Summary page.
WSM Key Business Developments
Release Date: March 19, 2025
- Q4 Revenue: $2.5 billion with a positive 3.1% comp.
- Q4 Operating Margin: 21.5%.
- Q4 Earnings Per Share (EPS): $3.28, a 20.6% increase year-over-year.
- Full Year Revenue: $7.7 billion with a full year comp of negative 1.6%.
- Full Year Operating Margin: 17.9% (excluding out-of-period adjustment).
- Full Year EPS: $8.50, a 14.4% increase year-over-year (excluding out-of-period adjustment).
- Cash Balance: $1.2 billion with no debt outstanding.
- Free Cash Flow: $1.1 billion.
- Share Repurchases: $807 million, or 4.6% of outstanding shares.
- Dividends Paid: $280 million, a 20% increase year-over-year.
- Return on Invested Capital: 54%.
- Pottery Barn Q4 Comp: Negative 0.5%.
- Pottery Barn Children's Q4 Comp: Positive 3.5%.
- West Elm Q4 Comp: Positive 4.2%.
- Williams-Sonoma Brand Q4 Comp: Positive 5.7%.
- B2B Revenue: Over $1 billion with a 12% comp in Q4.
- Rejuvenation Brand Growth: Double-digit growth, with positive comps in 17 of the last 20 quarters.
- 2025 Revenue Guidance: Comps flat to positive 3%, total net revenues down 1.5% to positive 1.5%.
- 2025 Operating Margin Guidance: 17.4% to 17.8%.
- 2025 Capital Expenditures: $275 million to $300 million.
- Dividend Increase: 16% increase to $0.66 per share.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Williams-Sonoma Inc (WSM, Financial) reported a positive 3.1% comp in Q4, outperforming the industry decline of 2%.
- The company achieved a record annual operating margin of 17.9% for 2024, with full-year earnings per share of $8.50.
- Strong performance in both retail and online channels, with retail stores delivering a positive 7% comp in Q4.
- Williams-Sonoma Inc (WSM) successfully leveraged supply chain efficiencies and cost control to exceed profitability estimates.
- The company is optimistic about 2025, focusing on brand growth, innovative product offerings, and strategic partnerships to drive sales.
Negative Points
- The housing market remains a challenge, with no significant improvement expected in 2025.
- Tariffs on China, Mexico, and Canada, as well as on metals and aluminum, are expected to impact operating margins.
- E-commerce comp was only positive 1.3% in Q4, indicating slower growth compared to retail stores.
- Full-year comp for 2024 was negative 1.6%, reflecting challenges in the furniture segment.
- The macroeconomic and geopolitical environment remains unpredictable, posing potential risks to future performance.
