The Temple & Webster Group Ltd (ASX: TPW) share price has been out of form on Thursday.
In late trade, the online furniture retailer's shares are down 5% to $8.36.
Why is the Temple & Webster share price falling?
Investors have been selling down the Temple & Webster share price today after brokers took a hammer to their valuations following its half year results.
For example, the team at Macquarie has retained its neutral rating but cut its price target by a sizeable 20% to $9.70. Whereas over at Morgan Stanley, its analysts have retained their overweight rating and cut their price target by 14% to $14.00.
It was a similar story at Bell Potter. Although its analysts have upgraded the company's shares to a buy rating, they have trimmed their price target on them by 5% to $12.00.
What did Bell Potter say?
Bell Potter has reduced its estimates to reflect its belief that the company's revenue growth will moderate as interest rates rise.
However, due to recent weakness in the Temple & Webster share price and its expansion into new categories, it sees enough value to recommend the company as a buy. In addition, due to the mountain of cash sitting on its balance sheet, the broker sees potentially accretive merger and acquisition (M&A) opportunities ahead.
It commented: "We have moderated our revenue growth forecasts as conservative measure in a rising interest rate environment, although we are yet to allow for upside from TPW's Home Improvement offering. The net effect is our PT reduces to $12.10 (previously $12.75)."
"Following TPW's share price retreat, we believe valuation is now more appealing with FY23e EV/sales ~1.8x. Also, TPW's new growth horizons (B2B / Home Improvement), the structural shift to online plus M&A prospects, provide attractive offsetting benefits vs potential risks from the housing cycle. Accordingly, we upgrade from Hold to Buy."
