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On Tuesday, UBS analyst Michael Lasser adjusted the price target for Williams-Sonoma (NYSE:WSM) shares, increasing it from $135.00 to $140.00, while continuing to recommend a Sell rating on the stock. According to InvestingPro data, the stock appears overvalued at its current price of $173.70, trading at a P/E ratio of 20.2x. Lasser acknowledged the company’s success in transitioning to a full-priced operating model, which has enhanced the resilience of its margin profile.
Lasser noted that Williams-Sonoma has disproved several elements of UBS’s previously cautious stance over recent quarters. The company has faced less market share pressure than UBS had anticipated. The company’s strong financial performance is reflected in its "GOOD" Financial Health Score on InvestingPro, supported by a 19-year streak of dividend increases and a healthy 46.8% gross profit margin. Despite these positive developments, Lasser’s caution is now rooted in the stock’s elevated valuation.
The analyst pointed out that the market expects Williams-Sonoma to potentially earn around $10 per share in earnings this year, even if the company’s initial guidance does not reflect this figure. However, Lasser expressed concern over the complexities of reaching this earnings target in the face of cautious consumer spending.
Lasser elaborated that consumer apprehension might increase due to the implementation of tariffs, the execution of other government policies, and heightened volatility in the capital markets. This apprehension is expected to affect consumers across all income levels, potentially impacting Williams-Sonoma’s performance. While analyst targets range from $123 to $230, InvestingPro subscribers can access 10+ additional exclusive insights and a comprehensive Pro Research Report for deeper analysis of the company’s prospects.
In other recent news, Williams-Sonoma Inc . reported its third-quarter 2024 financial results, revealing net revenues of $1.8 billion and a 7% year-over-year increase in diluted earnings per share to $1.96. Despite a 2.9% decrease in comparable sales, the company managed an improved operating margin of 17.8%. Telsey Advisory Group maintained an Outperform rating with a $230 price target, citing strong customer traffic and a robust holiday season. Telsey also adjusted its fourth-quarter expectations, projecting a 1.0% decrease in comparable store sales, better than the previous estimate of a 1.6% decline. Meanwhile, RBC Capital Markets reiterated its Outperform rating with a $189 price target, forecasting robust earnings per share growth despite fewer margin levers. Williams-Sonoma was also recently added to the S&P 500 index, replacing Celanese (NYSE:CE) Corp., marking a significant milestone for the company. This inclusion reflects the company’s growth and status within the large-cap market space.
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