Monday, KeyBanc Capital upgraded Williams-Sonoma Inc. (WSM) shares to Hold from Underweight. The brokerage raised its 2009 per share estimate to profit $0.37 from loss $0.01, and its 2010 EPS estimate to $0.56 from $0.40.
Analyst Bradley Thomas said that he downgraded WSM from Hold to Underweight on October 13, 2008, citing slowing consumer trends, particularly at the higher end. In the subsequent month following the analyst's downgrade, the stock declined 40%, compared to a 13% decline for the S&P 500.
The analyst noted that the company is now operating well on a number of fronts. Comps have improved, declining 15.3% in the most recent quarter, which exceeded guidance and expectations. Comparisons get easier and the better performing Williams-Sonoma brand will become a larger portion of sales in the fourth quarter.
Furthermore, the analyst added that the management deserves credit for tight inventory control, which has enabled fewer markdowns. With easier markdown comparisons ahead, the margin outlook is bright. Finally, the company has been aggressive with expense reduction initiatives, many of which have the potential to deliver permanent cost savings.
The analyst said that shares currently trade at trailing EV/EBITDA of 10.0x, vs. a five-year average of 8.1x. Based on the analyst's new estimates, he believes a price target of $21 would be reasonable, based on 8x his 2010 EBITDA estimate, in line with the average historical multiple.
However, with the stock price at $19.18, the analyst believes 10% upside does not currently warrant a Buy rating. The analyst would look to get more positive on the stock on a pullback or if he gets incremental positive datapoints on the company or the consumer. At this time, the analyst believes a Hold rating is appropriate.
Currently, WSM is down $0.06 or 0.31% and trading at $19.12.
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June 12, 2026 17:14 ET Major central bank action was the focus this week in economic news. The European Central Bank became the first major central bank to move in response to the rising inflationary pressures in the backdrop of the conflict in the Middle East. In North America, the U.S. inflation and trade data as well as Canada’s central bank decision gained attention. The Chinese trade data was the main news in Asia.