‘Material runway’: Goldman Sachs says Temple & Webster share price is a buy

Two happy woman looking at a tablet.

Two happy woman looking at a tablet.

The Temple & Webster Group Ltd (ASX: TPW) share price is having a positive finish to the week.

In early afternoon trade, the online homewares and furniture retailer’s shares are up over 3% to $5.75.

Why is the Temple & Webster share price pushing higher?

Investors have been buying the company’s shares on Friday after it was the subject of a bullish broker note out of Goldman Sachs.

According to the note, the broker has initiated coverage on the ecommerce company with a buy rating and $7.55 price target.

Based on the current Temple & Webster share price, this implies potential upside of 31% for investors over the next 12 months.

What did the broker say?

Goldman is bullish on the Temple & Webster share price due to the company’s “material runway for long-term growth.” This is being underpinned by the shift online, which is still in its infancy for the category compared to other key markets. The broker explained:

Temple and Webster is the largest pure-play online home retailer in Australia: we estimate it has 12.4% market share of the online homewares/home furnishings market, with 61% brand awareness (according to the company). We believe the business has a material runway for long-term growth, supported by a large and growing TAM driven by increasing e-commerce penetration which still lags other comparable markets (Aus 16% vs. UK/US 28%/25%), even after a large pull forward in online sales over the last 2-3 years. The significant scale that TPW has achieved, its superior digital capabilities, and data-driven approach to customer acquisition and retention position it well to continue to scale online.

Goldman also believes that the company is well-placed for growth despite the current challenging economic environment. It suggested that Temple & Webster “can deliver long term structural growth, despite a slowdown in the near term macro environment.”

In addition, the broker highlights that this side of the retail market has higher barriers to entry, which bodes well for the company.

[I]n our view TPW is best placed to be a winner in a category that favours scale players, requires a specialised approach to e-commerce, and has higher barriers to entry vs. other retail categories.

All in all, Goldman believes this positive outlook makes the Temple & Webster share price great value at the current level.

The post ‘Material runway’: Goldman Sachs says Temple & Webster share price is a buy appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Temple & Webster Group Ltd. The Motley Fool Australia has recommended Temple & Webster Group Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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