The Temple & Webster Group Ltd (ASX: TPW) share price is giving back some of yesterday's strong gains on Wednesday.
In morning trade, the online furniture and homewares retailer's shares are down 3% to $12.08.
Despite this, the Temple & Webster share price is still up 48% over the last 12 months.
Why is the Temple & Webster share price dropping?
Today's weakness in the Temple & Webster share price appears to have been driven by a combination of profit taking and the release a broker note out of Bell Potter.
In respect to the latter, this morning Bell Potter responded to the company's FY 2021 results by maintaining their hold rating.
And while the broker has lifted its price target to $12.40, this was a touch short of where its shares were trading prior to today.
What did Bell Potter say?
Bell Potter described Temple & Webster's full year results as "robust" and notes that it is comfortably cycling a tough prior corresponding period.
It commented: "FY21 sales of $326.3m (BPe $328.7m) was up 85% vs pcp. After achieving 3Q21 growth of 112%, TPW achieved growth of 26% in 4Q21 against a tough pcp (4Q20 growth of 130%). During 2H21 TPW flagged its intent to put the 'foot down' to drive revenue growth and expand its market leadership. We believe the early benefits of this is evident in TPW's 4Q21 sales result, with positive momentum continuing in July (up 39% vs pcp), albeit we believe July has also been buoyed by recent lockdowns."
However, the broker is holding firm with its hold rating on valuation grounds. It notes that the Temple & Webster share price trades at a significant premium to US peer Wayfair.
The broker explained: "While we recognise TPW's opportunities remain significant and maintain a positive long-term view, on a 12-month investment horizon we retain our Hold based on valuation (TPW FY22/FY23 EV/sales of 3.4x/2.5x which is at a fair premium vs Wayfair of 1.8x/1.5x). We are also cautious on the near-term domestic macro outlook for discretionary retail."
