Wayfair Inc (W.N): Share Gains & Cash Generation Accelerate

We remain OW-rated to reflect Wayfair's compelling positive skew with 70%/35% upside/downside to our bull/bear scenarios, and 25% upside to our updated PT of $155, raised from $145 previously. We thought the setup into the earnings announcement offered an attractive opportunity, despite the stock's recent valuation re-rating, as consensus was anticipating +HSD% U.S. revenue growth and a contribution margin of ~10%, slightly below Wayfair's ~15% algo, owing to last year's unusually low ACNR ratio. Topline momentum has continued to accelerate sequentially, putting U.S. revenue growth at 10.4% (vs. buyside expectations for 8-9%), in spite of incrementally tougher macro conditions for housing and housing-adjacent sectors like furniture/home furnishings. In addition, incremental contribution margin has benefitted from continued advertising efficiencies and customer loyalty, rising to ~20%, and yielding adjusted EBITDA of $236m (inclusive of an estimated $10m in non-recurring charges capture