Wayfair (NYSE:W) stock roared to an over 20% gain on Friday after announcing a cost-cutting plan and efficiency improvements.
Included in the plan is a 10% cut to the company’s global workforce, amounting to 1,750 employees due to be laid off. The company added that 18% of corporate employees, about 1,200 individuals, will be made redundant.
“The changes announced today strengthen our future without reducing our total addressable market, our strategic objectives, or our ability to deliver them over time,” CEO Niraj Shah said. “In hindsight, similar to our technology peers, we scaled our spend too quickly over the last few years.”
Some analysts were encouraged by that admission and focus on shoring up the bottom line in 2023 and beyond.
“Management is working diligently to run-rate at breakeven adjusted EBITDA in 2023,
regardless of the sales results,” Keybanc analyst Bradley Thomas wrote on Friday. “While there are risks that cost cuts could harm growth, we are optimistic on W’s expense opportunity, should the Company stay the course.”
Truist analyst Naved Khan echoed the sentiment, advising clients that he and his team “are encouraged by the company’s decision to realign investments to deliver tangible progress on profitability targets this year.”
Shares of the Boston-based e-commerce company rose 20.28% on Friday.
That said, many analysts still offered a modicum of caution on the stock as management struggles with slowing sales, a dynamic cost cuts cannot readily fix.
“Incremental cost saves suggest the business remains under pressure, yet W is taking positive EBITDA & FCF breakeven goals more seriously,” Wells Fargo analyst Zachary Fadem acknowledged. “That’s good for shares, yet low sales visibility and weak category demand remain key issues.”
He reiterated an Underweight rating on the stock, adding he “can’t quite get excited” about the stock even with the cost savings plan.
Read more on Morgan Stanley’s recent upgrade of the stock.
Read More: Why did Wayfair stock surge on Friday? Cost cuts spark hope for future profits (NYSE:W)