For the second week in a row, Wayfair(NYSE: W) looked set to be quite a rock star on the stock market. According to data compiled by S&P Global Market Intelligence, shares of the online furniture and home furnishings retailer were up by nearly 15% this week to date as of late Thursday evening. An analyst's recommendation upgrade provided much of this lift.
The RH and Temu Effects
Wayfair's rise started early in the week. Before market open on Monday Mizuho's David Bellinger reiterated his outperform (i.e., buy) recommendation on the company's stock. Ditto for his 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 RH, previously known as Restoration Hardware. That Thursday after market close, RH delivered a very impressive set of second-quarter fundamentals that sent its share price soaring; Wayfair's rose too, largely by association.
In his latest analysis on the company's stock, Bellinger cited what we can call "The RH Effect" as being a driver of Wayfair's continued rise. Yet he also pointed out that the Biden administration's effort to curb cheap imports from abroad, mainly by cut-price manufacturers in China, could benefit Wayfair handsomely. In his view, that move is "a key positive for W in dispelling at least some fears around increased competition/price undercutting by Temu."
Temu is the discount online retailer owned by China'sPDD Holdings that sells its wares to markets outside of the large Asian country.
Exception rejection
That effort by President Biden and his team, if successful, will close a loophole that allows importers to sell goods to U.S. customers tax- and tariff-free if a good is priced at or below $800. This will surely help Wayfair and RH and scores of other domestic retail companies, although it's difficult to gauge to what degree.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends RH and Wayfair. The Motley Fool has a disclosure policy.
