Wayfair (W): Should I Buy The Stock Now?

By Amit Chowdhry ● May 18, 2020
  • Online home furnishing store Wayfair saw its stock surge over the last few months. Here are some of the details you should know to help you decide whether to buy the stock now.

Wayfair Inc (NYSE: W), one of the world’s largest online home furnishing stores, has seen its stock price go on a wild ride over the last few months. About a year ago, Wayfair was trading at between $152-$153. And then it dropped down to $23.52 on March 19, 2020. And now it is trading at about $154-$155 again. In the last month alone, the company’s surged over 66%.

Earlier this month, Wayfair reported its Q1 2020 results. Wayfair’s net loss had increased to $289.9 million from $200.4 million the year earlier. But revenue totaled $2.33 billion, up 20.1% from the period a year ago. Plus Wayfair beat expectations in terms of the EPS as well.

For the 12 months ended March 31, 2020, Wayfair Inc (NYSE: W) generated $9.5 billion in net revenue. And Wayfair Inc (NYSE: W) reported it now has 21.1 million active customers as of March 31, up 28.6% from the same period a year earlier with average revenue per customer at $449. Plus Wayfair Inc (NYSE: W) delivered 9.9 million orders for the quarter, up 21% from a year earlier.

Wayfair CEO and co-founder Niraj Shah pointed out that business has been surging since customers have been working from home since mid-March in order to flatten the curve of COVID-19.

Morningstar equity analyst Jaime Katz, CFA said that Wayfair said that the ratings firm is planning to maintain a five-year outlook, which includes upper-teen sales increases on average and adjusted EBITDA margins that turn consistently positive in 2023. And Morningstar raised its fair value estimate to $77 from $70 per share in response to the demand surge.

As of the end of 2019, Wayfair offered about 18 million products from over 12,000 suppliers. These brands include Wayfair, Joss & Main, AllModern, Birch Lane, and Perigold.

Should You Buy Wayfair Inc (NYSE: W) Now?

Based on the reports I have been reading, 38% of analysts are saying buy, 41% of analysts are saying hold, and 22% are saying sell.

Case From The Bulls:

The bulls are saying that the company has expanded into untapped markets like Canada, the UK, and Germany over the last 5 years and it has plenty of room to growth for international opportunities. And different brands in the Wayfair portfolio resonates across various income and age demographics — which could be handy in cases of macroeconomic cyclicality. Plus more than 13 million households will be formed over the next decade thus helping boost home furnishing demand.

Case From The Bears:

The bears are saying that weakness in the housing market could weight on the top and bottom-line growth as new homeowners represent a major portion of home-related purchases. And low customer switching costs along with the mass-merchant competitors in the home furnishing category may pressure Wayfair’s long-term margin expansion. Plus the expectation that Amazon entering the market aggressively could also cause customer acquisition costs to inflate.

Disclosure: I own a small number of Wayfair Inc (NYSE: W) shares. I wrote this article myself and I do not have any business relationship with any company whose stock I write about. I am not a financial advisor and all articles are my opinion. You should do your own due diligence and consider talking to a financial professional before investing.