Wayfair Moves Higher After Blowout Quarter 

We like Wayfair (NYSE: W) for a couple of reasons including its pure-play status as an eCommerce retailer, its platform approach to home decor, and its focus on home decor and home improvement.
Wayfair Moves Higher After Blowout Quarter 
Image credit: Depositphotos.com contributor/Depositphotos.com via MarketBeat

Free Book Preview Money-Smart Solopreneur

This book gives you the essential guide for easy-to-follow tips and strategies to create more financial success.
4 min read
This story originally appeared on MarketBeat

Wayfair In Good Shape But Gains May Be Limited 

We like Wayfair (NYSE: W) for a couple of reasons including its pure-play status as an eCommerce retailer, its platform approach to home decor, and its focus on home decor and home improvement. eCommerce is one of the biggest winners from the pandemic and home improvement isn’t far behind. As for the platform approach, the company is aiming to connect all of America’s manufacturers in a single portal making it a very ambitious project indeed. The problem now is the company’s valuation, the broad-market conditions, and the high 19% short-interest that may cap gains in the near term. 

Wayfair Exceeds The Markets Expectations 

Wayfair had a great Q1 period and one that exceeded the market’s expectations. The company reported $3.48 billion in net revenue or up 49.4% from last year which is fabulous, the problem is the revenue only beat the consensus by about 250 basis points which isn’t really enough to justify the valuation in our opinion.

On a segment basis, the International segment led with 85% growth to top 20% of net revenue. The U.S. segment saw smaller 42.8% YOY growth but comes in at just shy of 80% of the net. Mobile, a key feature of the company’s strategy, jumped 510 basis points to 60% of total order volume. 

Moving down the report, the company was able to leverage the sales strength to full effect. Gross profit grew to 28.8% of revenue to produce solid gains on the bottom line and a surprise profit at the GAAP level. On a GAAP basis, which includes investment in future growth, the company produced $0.16 in earnings to reverse a loss in the previous year and beat the consensus by nearly $0.80. On an adjusted basis, the company’s $1.00 in earrings beat by $0.71. 

“Wayfair’s focus remains squarely on connecting all of the industry’s customers and suppliers on our unique platform, which is custom-built to address the specific needs of shopping for the home. Our platform model creates a flywheel where scale begets growth, which leads to further efficiency. We see this in action each quarter, and Q1 was no exception,” said Niraj Shah, CEO, co-founder and co-chairman, Wayfair. “We grew to $3.5 billion dollars in net revenue in the quarter, having added more than $1 billion dollars to the top-line year-over-year, and generated over $200 hundred million dollars in adjusted EBITDA -- all while simultaneously and ambitiously investing for the future”

The Technical Outlook: Wayfair Pops On Favorable Outlook 

Shares of Wayfair popped more than 6.0% after the Q1 release and may go sharply higher if the short-sellers start covering their positions. The company didn’t give any formal guidance but the commentary was very positive. CEO Niraj Shah predicts both revenue and profitability will improve which we think could spark a short-covering rally if not a short squeeze. 

“We are confident that customers will remain focused on their homes even as the environment normalizes in the US and Europe, and that our strong profitability should not only continue but expand.”

The first major hurdle for price action is going to be the short-term 30-day EMA. If the market can get back above that level we see the stock moving up to retest the $350 level if not set new all-time highs. If the EMA can’t be regained then this stock may fall back to $260 or lower under the pressure of bearish activity.

Wayfair Moves Higher After Blowout Quarter 

Featured Article: What does it mean to hold a stock in street name?

More from Entrepreneur
Our Franchise Advisors will guide you through the entire franchising process, for FREE!
  1. Book a one-on-one session with a Franchise Advisor
  2. Take a survey about your needs & goals
  3. Find your ideal franchise
  4. Learn about that franchise
  5. Meet the franchisor
  6. Receive the best business resources
Discover the franchise that’s right for you by answering some quick questions about
  • Which industry you’re interested in
  • Why you want to buy a franchise
  • What your financial needs are
  • Where you’re located
  • And more
Try a risk-free trial of Entrepreneur’s BIZ PLANNING PLUS powered by LivePlan for 60 days:
  • Get step-by-step guidance for writing your plan
  • Gain inspiration from 500+ sample plans
  • Utilize business and legal templates
  • And much more

Latest on Entrepreneur