Wayfair (NYSE:W) stock has a secret, and Wall Street is trying to guess what it is.
The secret is: How much business did Wayfair do during the holiday-shopping season? The answer won’t be revealed until Feb, 22, but analysts’ current consensus estimates are $1.96 billion, with a loss of about $100 million or $1.70 per share.of Wayfair stock.
Wayfair bet big on Christmas, perhaps bigger than any other online retailer. The company blanketed the airwaves with commercials, trying to lure women into its virtual store to buy furniture and other home products.
Many women did log onto Wayfair.com, and many of them bought Wayfair’s products. But how many customers did Wayfair have? Were they happy afterward, like the women in the commercials? Will they come back?
Credit Suisse analyst Stephen Ju says most of Wayfair’s customers were pleased with their purchases, and he recently upgraded Wayfair stock, saying it could rise 30%. Other analysts are also upbeat on Wayfair stock. Wayfair stock price has risen from $80 to $104 so far in 2019.
Wayfair’s Tough 2018
Before Christmas, Wayfair had a tough 2018. One of its problems was the U.S. Supreme Court, which ruled in South Dakota vs. Wayfair that, when substantial purchases are made from an online store, a “nexus” exists, and sales tax must be paid. Previously, online merchants didn’t have to pay sales taxes on purchases within a state if they did not have a physical store, warehouse, or office in that state. Now, if online businesses sell as little as $100,000 to customers in a state, with as few as 200 transactions, they may owe as much as $10,000 of tax.
That has created a mess for online merchants because sales taxes aren’t uniform. States, counties and cities may impose separate sales taxes. Some charge tax on gross sales, others on gross revenues, still others on retail sales, gross receipts, or taxable sales.
After Wayfair stock fell starting in September, from a high of almost $150 to a December low of about $80, owners of Wayfair stock began suing the company. They allege that Wayfair misstated its third- quarter earnings, which ended up featuring a large loss, so that insiders could sell their shares
The Bigger Questions About W Stock
Owners of Wayfair stock should be worrying about Amazon.com (NASDAQ:AMZN), which now generates $4 billion of revenue per year from selling home furniture, against $6.5 billion for Wayfair. AMZN also now has its own home-furniture brands.
Investors should also be asking where the furniture business is going. The investment roadside is littered with companies that have tried to sell furniture and found that many Americans will make-do with what amounts to garage-sale merchandise. (I’m guilty as charged.)
Home furnishings are a tough business to be in. Young consumers rush to privately-held Ikea, middle-aged consumers inherit pieces from their parents, and once families are established they focus more on goods that can be found at Home Depot (NYSE:HD) or Lowe’s Companies (NYSE:LOW).
The Bottom Line on Wayfair Stock
Right now, as Wayfair totals sales from its spectacular “four day clearance” sale, when some goods were marked down as much as 75%, more analysts have “hold” ratings on Wayfair stock than have “buy” ratings on it.
This is a company that is racing hard to stay in place. I would rather relax on an old couch.
Dana Blankenhorn is a financial and technology journalist. He is the author of a new mystery thriller, The Reluctant Detective Finds Her Family, available now at the Amazon Kindle store. Write him at firstname.lastname@example.org or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in AMZN.