Shelter-in-Place Orders Providing a Nice Boost to Wayfair Stock

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Among online home-furnishing retailers, Wayfair (NYSE:W) is a highly recognizable name. The shelter-in-place restrictions caused many stocks to decline since the beginning of the year. This phenomenon has had the opposite effect, however, when it comes to Wayfair stock.

wayfair stock

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Some traders might consider that to be an unexpected outcome. After all, shouldn’t a 14.7% unemployment rate cause people to tighten their wallets and purses?

On the other hand, there has been a major shift in people’s spending patterns. That includes a pivot towards online shopping instead of buying items at brick-and-mortar retail outlets.

This pivot has made Wayfair stock a red-hot asset since mid-March. In fact, traders have witnessed the share price jump from $23 and change to more than $150. And given the company’s first-quarter earnings results, there could be much more gas left in the tank for this company and its stock shares.

A Monster Quarter for Wayfair Stock

A breakdown of the first-quarter earnings data clearly indicates a highly profitable company. The numbers demonstrated that Wayfair should continue to enjoy robust profits not just for the duration of stay-at-home orders, but far beyond that.

We can start with the quarterly net revenue, which outperformed the expectations of analysts as well as the company itself. Wayfair predicted revenue of $2.235 billion to $2.275 billion while the analyst community’s consensus estimate was $2.31 billion for the quarter.

The actual result was $2.33 billion. That’s 19.8% more than the revenue from the comparable quarter of the prior year. This places Wayfair in an elite category of companies that are actually doing better than they were a year ago.

In regard to Wayfair’s non-GAAP loss for the first quarter, the analyst consensus estimate was $2.61 per share. The company came in with a smaller loss of $2.30 per share, thereby “beating the street” once again.

Additionally, Wayfair posted a quarterly gross margin of 24.9%. The company had been expecting 23% to 24%, so the actual result was a nice surprise.

But what about the customer count? As it turns out, Wayfair excelled in this area as well. In the company’s direct retail business, Wayfair’s active customers increased by 28.6% year-over-year to 21.1 million. And Wayfair’s customers were highly active in the first quarter, delivering 9.9 million orders for a 21% year-over-year increase.

Betting on Momentum

It is unlikely that the pandemic will be over very soon and shoppers will quickly revert to pre-virus habits. Yet even if that somehow miraculously happened, online shopping should still remain a crucial and lucrative part of the economy. W stock is positioned to take full advantage of this emerging trend,

During the pandemic, there were new customers, but many of Wayfair’s shoppers stayed loyal to the company. Specifically, repeat customers accounted for 69.8% of Wayfair’s first-quarter orders, which is greater than 66% a year ago.

The data clearly indicates a wave of satisfied customers for Wayfair. But don’t get the impression that it’s all just repeat business from shoppers who signed up prior to the pandemic.

As Wayfair CEO Niraj Shah explains, stay-at-home orders helped the company to expand its consumer base.

“Millions of new shoppers have discovered Wayfair while they shelter in place at home, and we are seeing strong acceleration in new and repeat customer orders across almost all classes of goods and across all regions,” Shah said.

The company remains ambitious with a long-term target of gross margins of 25% to 27%. Wayfair also intends to achieve an adjusted EBIDTA margin of 8% to 10%. It’s entirely possible that the company can surpass these targets, with or without the shelter-in-place mandates.

The Final Word on Wayfair Stock

One result of the spread of the coronavirus has been a change in how people shop. Wayfair stock’s impressive run could be attributed to this change. However, the company’s business is so strong now that Wayfair doesn’t need a calamity to turn a robust profit.

Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.


Article printed from InvestorPlace Media, https://investorplace.com/2020/05/shelter-in-place-boost-wayfair-stock/.

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