Williams-Sonoma stock analysis: sky is the limit for WSM?

Williams-Sonoma (WSM) stock price is on track to have its best week on record after the American retailer published strong financial results and boosted its returns to shareholders. 

WSM shares have soared by over 32% this year and are hovering at their all-time high. This makes it one of the best-performing retailers since it has soared by 265% from its 2022 lows. This jump has brought its market cap to over $17 billion. 

Williams-Sonoma has been firing on all cylinders

Williams-Sonoma is an American retailer that has been ahead of its time. It was one of the first companies to embrace the internet and offer its products online. 

Today, while the company has hundreds of stores in the country, it generates most of its sales online. It has even become the 22nd biggest e-commerce company in the US, making it bigger than Fanatics, Lululemon, and Urban Outfitters.

Also, the company has done well by having brands that cater to most people. In addition to its eponymous brands, the company also owns other brands like Pottery Barn, West Elm, and Pottery Barn Kids & Teen. Pottery Barn is its biggest brand, accounting for over 50% of its total revenue. 

The company has a leading market share in the specialty furniture industry. Its annual revenue of $7.8 billion is more than twice that of RH, the second biggest player. It is also bigger than Crate & Barrel, Arhaus, Ethan Allen, and Serena & Lily, which made less than $4 billion last year.

The WSM stock price has done well, helped by its strong financial results as its annual revenue has soared to over $7.7 billion. 

Read more: Williams-Sonoma stock: is this future dividend aristocrat a buy?

WSM earnings

The most recent results showed that WSM’s comparable brand revenue dropped by 2.9% in the last quarter. Its operating margin rose to 17.8%, while its diluted EPS growth rose by 7.1% during the quarter.

Williams-Sonoma’s revenue came in at $1.8 billion, down from $1.85 billion. Similarly, the nine-month revenue was $5.2 billion, down from $5.4 billion. This decline is mostly because of the ongoing general consumer spending because of the relatively high inflation rate.

Pottery Ban’s revenue was $718 million, while West Elm, Williams Sonoma, and Pottery Barn Kids & Teens made $451 million, $252 million, and $287 million, respectively. 

The most important part of its report was the fact that the company boosted its forward guidance, citing resilient demand.  

Most importantly, the company announced that it will repurchase shares worth $1 billion, a substantial amount for a company valued at $1 billion. These repurchases have helped to reduce its outstanding shares over time. Shares have moved from 173.7 million in 2017 to 123 million today. This trend has helped to move its EPS rise from $1.65 to $7.3. 

The other potential catalyst for the Williams-Sonoma stock price is that it has become an undervalued company. It has a forward price-to-earnings ratio of 16.8, lower than the median industry of 19. 

Williams-Sonoma stock analysis

The weekly chart shows that the WSM share price has staged a strong bullish comeback. This recovery happened after the stock formed a double-bottom at $125.81, a popular bullish sign. 

It has also moved above the important resistance at $172.91, its highest swing in June and the previous all-time high. 

The stock has moved above the 50-week and 100-week Exponential Moving Averages (EMA), while the Relative Strength Index (RSI) has moved to 65. 

Therefore, the path of the least resistance for the stock is bullish, with the next point to watch being at $200. The stop-loss for this trade is at $160.

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