Wayfair (W) showed a sustainable acceleration in revenue growth and disciplined cost management, providing a clear path to stronger profitability, Morgan Stanley said in a report Wednesday.

The online furniture retailer's roughly 800-basis-point revenue acceleration over the past two quarters reflects strong market share gains driven by better pricing, product availability, faster delivery, and its "Wayfair Rewards" loyalty program, along with early sales benefits from generative artificial intelligence tools such as "Muse" and "Discover," Morgan Stanley said.

On the profitability side, the firm highlighted Wayfair's cost discipline, with contribution margin set to reach its highest level since 2019, excluding the COVID-19 pandemic, and forecast 12% and 17% incremental margins in 2026 and 2027, respectively, consistent with the company's long-term targets, the report said.

Morgan Stanley lifted its price target on Wayfair to $130 from $105 following strong Q3 results while reiterating its overweight rating.

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