Wayfair and Vivid Seats are BofA's top picks in the SMID e-commerce space

Bank of America thinks the general setup for SMID cap Internet stocks in 2024 is more constructive due to a number of factors. Analyst Curtis Nagle and team noted that rate expectations have shifted from higher-for-longer to cuts by the Federal Reserve, and concerns over a recession have now shifted to a possible soft landing in 2024. However, the firm is picky in doling out Buy recommendations following a 48% average increase in SMID cap shares in 2023, to push valuation to only 8% below the historic median. It was also highlighted that consensus revenue growth for the group is only 8% vs. the historical average of 25%.

Wayfair (NYSE:W) and Vivid Seats (NASDAQ:SEAT) are BofA top two SMID cap Internet stock for the new year. Nagles and team think Wayfair (W) is well positioned to accelerate revenue over the next two years through continued share gains and category improvement. "We also continue to see Wayfair as a compelling margin story that could see outsized OPEX leverage, on top of continued GM expansion," read the BofA breakdown. Meanwhile, BofA sees Vivid Seats (SEAT) as one of the most attractively valued companies in SMID cap Internet, with shares trading at 7X the 2025 EV/EBITDA estimate vs. estimated EBITDA growth of 28 in 2024 and 18% in 2025. While two secondary stock sales pressured valuation for SEAT in ’23, BofA expects rerating in 2024 on resilient industry demand.

Shares of Wayfair (W) tracked 0.35% higher in premarket trading on Wednesday. Vivid Seats (SEAT) gained 1.52%. Wayfair (W) has an outstanding short interest position on it of 23.2% of the total float.