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Williams-Sonoma Pops 7% On Blowout 3Q Earnings; Analyst Raises PT

Williams-Sonoma shares jumped 7% in the extended trading session on Thursday after the home goods retailer smashed analysts’ 3Q FY20 (ended Nov. 1) earnings estimates, driven by growth across all of its brands and higher margins. Home goods retailers have been experiencing a surge in demand since the pandemic’s onset as people are spending more time at their homes.

The company’s 3Q adjusted EPS exploded 150% year-over-year to $2.56, easily surpassing analysts’ forecast of $1.51. Williams-Sonoma’s (WSM) revenue grew over 22% to $1.77 billion, backed by accelerated growth across all of its brands, with comparable brand revenue growth of 31%. Analysts were expecting revenue of $1.59 billion. The company’s brands include Williams Sonoma, Pottery Barn, Pottery Barn Kids, West Elm, Pottery Barn Teen, Williams Sonoma Home, Rejuvenation, and Mark and Graham.

Also, e-commerce comparable brand revenue growth came in at 49.3%, and accounted for about 70% of overall 3Q revenue. (See WSM stock analysis on TipRanks)

The company did not issue any guidance due to COVID-related uncertainties. However, over the long-term, it expects to generate net revenue growth of mid to high single digits.

Following the print, Wells Fargo analyst Zachary Fadem increased his price target on Williams-Sonoma to $110 from $100 but reiterated a Hold rating, saying, “WSM clearly deserves credit for navigating the current COVID landscape in expert fashion. That said, we can’t help but think FY21 expectations could be getting carried away in the face of considerably difficult 2H comparisons, a return of category promo and potential mean reversion in home goods-related spend.”

Meanwhile, the Street is cautiously optimistic about Williams-Sonoma, with a Moderate Buy analyst consensus based on 5 Buys, 7 Holds and 1 Sell. With shares rising 37.6% so far this year, the average price target of $104.50 implies a modest upside potential of 3.42% from the current levels.

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