Shareholders of online furniture retailer Wayfair Inc. (NYSE: W) have been speculating about their returns for long, with the stock not making any meaningful gains in the past several months. After falling to a multi-year low in March, it regained a part of the lost momentum towards the end of the month.
The market will be curious to know where the stock is headed after being beaten by the recent selloff. It is a fact that being an e-commerce retailer, Wayfair is less affected by the widespread shutdown. Still, that might not help sales, because of low spending by customers during the period of crisis.
Customer Growth
There has been a steady uptick in Wayfair’s user base, but it suffers from elevated costs that eat into margins. Benefits of the ongoing expansion program, which involves heavy investment, are yet to show up. CEO Niraj Shah has a bullish view and sees solid expansion in overseas markets, especially in Germany and the UK where sales grew in double-digits in 2019.
Growth Plan
The general perception is that the efforts to expand shipping service and ramp up the distribution network, combined with cost-cutting, are setting the stage for a turnaround. The steady uptick in orders complement these initiatives. The superior brand value and growing global footprint should give Wayfair the necessary strength to tide over the present crisis.
Call for Caution
Analysts are divided in their recommendations, though the average price target points to a decent uptick in value. Brokerages like Loop Capital, which recently lowered the rating on the company, remain sceptical about the stock’s near-term prospects. The evasive profit and heightened uncertainty make the stock risky but those looking for a long-term deal will not be disappointed.
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Given the company’s positive top-line performance and other encouraging metrics, the stock’s weak performance looks exaggerated. The bottom-line remained in the negative territory throughout 2019 and the company ended the year on a dismal note. Fourth quarter adjusted loss widened to $2.50 per share and missed the Street view, despite a 26% growth in revenues to $2.5 billion.
At $47.24, Wayfair’s stock closed the last trading session down 70% compared to last year’s peak. Earlier, it had slipped to a multi-year low.