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Why Did Wayfair Tank 26% on Thursday?

Online furniture retailer Wayfair (W) has reported mixed first-quarter 2022 results. The company’s performance was marred by global supply chain disruptions and fewer orders. Shares of the company tanked a solid 25.7% on Thursday.

Results in Detail

The company reported an adjusted loss of $1.96 per share, higher than analysts’ loss estimates of $1.53 per share. The company had posted adjusted earnings of $1 per share in the same quarter last year.

Quarterly net revenues fell 13.9% year-over-year to $3 billion, just above the consensus estimate of $2.99 billion. Net revenue per active customer in the last 12 months stood at $520, up 12.8% year-over-year.

During the quarter, the company’s active customer base fell 23.4% year-over-year to 25.4 million, while repeat customers placed 8.1 million orders, down 26% from the same quarter last year.

The CEO, Co-Founder and Co-Chairman of Wayfair, Niraj Shah, said, “We are well positioned to outperform and gain share from here, particularly as supply chain constraints ease, and we are not losing sight of the massive market opportunity still ahead. At the same time, we are focused on returning to adjusted EBITDA profitability. We have complete confidence in the structural economics of our business based on the investments we have made and the key drivers that should propel profitability higher over time.”

Wall Street’s Take

In response to Wayfair’s performance, Wells Fargo analyst Zachary Fadem lowered his price target on the stock to $65 (implying 3.6% downside potential) from $100 while maintaining a Sell rating.

“Bigger picture, we believe W shares suffer from “wrong stock, wrong tape” syndrome, as investor appetite for high growth, negative EBITDA (and FCF) pandemic winners is very low. And considering increasingly difficult visibility and a CFO transition, we see more downside,” the analyst said.

Overall, the stock has a Hold consensus rating based on eight Buys, nine Holds, and seven Sells. Wayfair’s average price target of $125.78 implies 86.5% upside potential to current levels. Shares have lost 15.1% over the past year.

Website Traffic

TipRanks’ Website Traffic tool helped us gain insight into Wayfair’s performance for the reported quarter even before the company released its results.

According to the tool, a website traffic downtrend was visible. In Q1 2022, total estimated visits on wayfair.com trended lower, on a global basis, representing a 35.5% year-over-year decline. This, in turn, indicated that the company might report weak revenues in the first quarter.

Conclusion

The company has performed poorly during the quarter, partly due to its efforts to expand internationally and set up physical retail locations. At present, investors interested in the stock may opt for a wait-and-watch strategy to see how Wayfair’s plans take shape.

Learn more about the Website Traffic tool in this video by Youtube sensation Tom Nash.

Read full Disclaimer & Disclosure

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