Wayfair (NYSE:W) stock has been on fire during the pandemic, in the best possible way.
Since the bottom of the panic selling in mid-March, shares in the online home furnishings store are up 865%. Just in the last three months they’re up 95%.
Wayfair stock opened for trade July 29 at $233.63. That’s a market capitalization of over $21.5 billion, for a retailer that had $9.1 billion of sales last year. Sales for the quarter ending in March were down sequentially.
Investors are expecting big things when Wayfair reports August 5. Sales are estimated at $3.9 billion. Earnings are estimated at 83 cents per share, with a “whisper number” of 93 cents.
My spidey sense is tingling, and not in a good way.
Behind the Wayfair Stock Buzz
Analysts have been pounding the table for Wayfair as if it were the second coming of Amazon (NASDAQ:AMZN). Piper Sander analyst Peter Keith sees Wayfair beating the estimate handily and making that $15 billion sales figure. He has it listed at an “overweight” rating. Jonathan Matuszewski of Jefferies said that website traffic data tells him the rally has further to go.
InvestorPlace Markets Analyst Luke Lango also thinks the rally has some juice left in it, although his estimate on further gains is modest.
Why are expectations so high?
JPMorgan Chase (NYSE:JPM) says consumer credit card spending is now down only 10% from pre-pandemic levels. It says “card not present” traffic, such as e-commerce, is back to pre-pandemic levels. Chase manages cards for Amazon.
A survey from Needham says respondents plan to shop online this fall despite the pandemic, with home furnishings their top priority. To be honest, I could use a new couch.
But I’m not buying anything big until this pandemic is over.
Like many whose families makes good money, I’m spending less than before. Any extra money is going to charity, and to our millennial kids. The novel coronavirus has impacted both of their careers.
That Chase survey may also be misleading, according to Robert W. Baird analyst Colin Sebastian. Remember, Chase manages cards for Amazon. Amazon has begun doing more advertising for its own home furnishings. Amazon also has a huge advantage over Wayfair in a one-to-one match-up. Its delivery infrastructure is scaled and paid for. Wayfair must buy shipping.
There’s also this bit of nonsense, a bid by conspiracy theorists to tie Wayfair to child trafficking. This is garbage, delivered to social media by hard-to-identify accounts. It started on Reddit, after someone noted that cabinet names such as Samiyah and Yaritza were names of missing women and children. Despite attempts by fact-checkers, the theory is clearly gaining traction, with calls to the National Human Trafficking Hotline skyrocketing.
But it’s nonsense. It’s a lie. The conspiracy shouldn’t influence your opinion of Wayfair stock.
The Bottom Line
Personally, I’m a lot more worried about rumors spread by analysts than those spread by Reddit conspiracy theorists.
There’s a ton of money out there, looking for a return. Speculation is rampant. Stocks are now the most liquid asset you can buy. Trading on many sites is free.
In this kind of atmosphere, it pays for an investor to be careful. I would wait for earnings before considering a purchase of Wayfair stock. If I’m wrong, I’ll miss the train. But if I’m right, and earnings come up short, then I might consider buying.
Wayfair is a good company. The stock’s just too high right now.
Dana Blankenhorn has been a financial and technology journalist since 1978. His latest book is Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, essays on technology available at the Amazon Kindle store. Follow him on Twitter at @danablankenhorn. As of this writing he owned shares in AMZN.