Wayfair W -2.37% stock was mostly flat on Monday after an analyst lowered the home furnishings store’s shares because they were worried about how it would do in the near future in a tough housing market.
On Monday, John Staszak, an analyst at Argus Research, turned shares of Wayfair W -2.37% from Buy to Hold without giving a price goal. In a study note, Staszak said that the company will have a hard time in the near future because the housing market is bad.
“High interest rates and fewer home sales make the company’s prospects look bleak right now,” Staszak wrote in a note.
As of early Monday morning, shares of Wayfair W -2.37% were up 0.3%. The S&P 500 index SPX -0.32% is also up 0.2%.
The stock has dropped 26% this year before the expert cuts it. Wayfair reported earnings for the second quarter that were lower than what Wall Street expected, which caused shares to drop 8% on August 1. In the earnings report, COO Niraj Shah said, “The category correction now mirrors the magnitude of the peak to trough decline the home furnishings space experienced during the Great Financial Crisis.”
A number of issues have arisen in the home repair market, affecting firms such as Home Depot HD -0.39% and Lowe’s LOW 0.17%. The housing market is moving more slowly because debts and home prices are high, making it harder for people to buy homes. As fewer people buy furniture to fill empty homes, home improvement stores experience a drop in sales. Demand has also been hurt by high interest rates, which make it more expensive to finance big purchases.
A tight housing market has also hurt Williams-Sonoma WSM -3.30%, a company that sells furniture for the home. The store said last week that it now thinks full-year sales will drop 1.5% to 4%. This is different from what it thought before, when it thought sales would be anywhere from up 3% to down 3%.
Even so, Staszak tells investors not to sell the company but to wait it out.
“We would think about an upgrade if the Federal Reserve lowered interest rates more than we expected or if the housing market recovered more than we thought it would,” he said. Last week at Jackson Hole, Fed Chair Jerome Powell said that the bank plans to lower interest rates in September. The rate would go down for the first time since 2020.
