Pets, Kids, And Fancy Couches: Good Choices, Or All Overrated

Morgan Stanley initiates credit coverage on Wayfair, RH, Petco, and Carter's. The report highlights Wayfair as the top pick for its improving credit fundamentals and cheap bond valuations.

Key Takeaways

• 1.Wayfair (W) is the preferred credit given EBITDA growth, free cash flow generation, and attractive bond spreads.
• 2.RH is viewed with caution due to elevated leverage, execution risks, and sensitivity to the housing cycle.
• 3.Carter's (CRI) and Petco (WOOF) are neutral, with limited near-term visibility or catalysts for significant deleveraging.

Table of Contents

• Key Takeaways
• Fundamental Views: Constructive on W, Cautious on RH, Neutral on CRI, WOOF
• Relative Value Across Secured, Apparel, and Housing
• Disclosure Section
• Analyst Certification
• Global Research Conflict Management Policy
• Important Regulatory Disclosures on Subject Companies
• STOCK RATINGS
• Global Stock Ratings Distribution
• Analyst Stock Ratings
• Analyst Industry Views
• Important Disclosures for Morgan Stanley Smith Barney LLC Customers
• Other Important Disclosures

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