Buy Wayfair Stock at Highest Prices as Post-Coronavirus E-Commerce Boom?

Wayfair’s W has surged during the coronavirus economy, and W shares the sentiment, having surged a staggering 650% since March 20 to crush fellow stay-at-home star Zoom’s 85%. Investors, on the other hand, may consider buying the e-commerce giant as a long-term play as its growth, prospects and other fundamentals remain strong.

Why Wayfair

Wayfair is an online retailer – in addition to several brick-and-mortar and pop-up locations – that sells furniture, home décor, home appliances and more. This includes everything from sofas and beds to refrigerators and microwaves, as well as almost anything you could want for your home or apartment, such as wall decorations.

Wayfair went public in 2014, and its family of websites includes its namesake as well as Joss & Main, AllModern, Birch Lane and Perigold. Wayfair as a whole competes with the likes of Target TGT and RH RH and has proven it can grow in this niche even as Amazon AMZN expands its reach.

W’s revenue increased from $1.3 billion in fiscal 2014 to $9.1 billion in 2019, with sales growing 35% or more over the past three years – after growing 50% in 2016 and 70% in 2015. This expansion apparently occurred much earlier. The virus pandemic forced people to stay at home and close “unnecessary” stores.

In the most recent quarter, Wayfair’s revenue grew 20% in the three months ended March 31, while its number of active customers increased 29% to 21.1 million. The Boston-based company also reported a narrower-than-expected first-quarter adjusted loss. Wayfair executives believe the pandemic could accelerate e-commerce growth.

“The broader market disruption has highlighted many of the differentiated advantages we have built as a leader in home e-commerce over the past two decades,” CEO Niraj Shah said in prepared remarks. “Millions of new customers have discovered Wayfair while sheltering at home, and we are seeing strong growth in new and repeat customer orders across almost all classes of goods and across all regions.”

Other basics

Wayfair’s stock has risen from below $30 a share to new highs of over $200 a share in the last three months. Despite the growth, W is trading at 1.4 times the Zacks trailing 12-month sales estimate, which represents a discount to the S&P 500 Index’s 3.5 times and the industry’s 2.2 times. Moreover, Wayfair is trading below its two-year highs of 1.7X and Home Depot’s HD 2.3X.

Looking ahead, our Zacks Estimates project Wayfair’s second-quarter sales to surge 66%, marking the strongest growth since the second quarter of 2016. Additionally, W is expected to move from an adjusted quarterly loss of -$1.35 in the same year period a year ago to +USD 0.85 per year. participation.

The company’s fiscal 2020 revenue is then projected to grow another 37% to reach $12.5 billion. Wayfair’s full-year losses are also expected to decline in 2020 and 2021, and adjusted earnings estimates for 2020 and 21 showed a clear trend in the right direction.

Bottom line

Wayfair will be growing at a time when many retailers are seeing huge success, which could make it an attractive play in the near future, even if it retreats somewhat. Wayfair’s positive earnings revisions are helping it earn a Zacks Rank #1 (Strong Buy) right now.

Investors thinking about the longer term should note that Wayfair continues to spend significant resources on its own growth. W shares still have a high level of short interest, which means investors – usually large ones – are betting against the stock.

That said, some investors may want to buy Wayfair as a bet on the future of shopping. It’s also worth remembering that e-commerce is still in its early days and accounted for just 11.8% of total U.S. retail sales in the first quarter, according to the U.S. Department of Commerce.

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