One of Thursday’s biggest losers was a well-known specialty e-commerce brand. Wayfair (NYSE: W), an e-commerce giant that focuses on selling furniture and home goods for over 17 years, just hit a major setback recently that has analysts and shareholders alike worried. The company ended up taking a hit to its sales figures for the holiday season, prompting fresh worries from Wall Street over the company’s health and its chronic lack of profitability.
The company’s stock has already tumbled 14% over the past few days as various analysts and research groups cautioned that Wayfair might be struggling in terms of its profitability and growth outlook. With the holiday season being a critical time for retail and e-commerce brands alike, the fact that Wayfair’s sales fell short of expectations during this time is a worrying sign for the company.
The e-commerce brand said that it expects its quarter net revenues of $2.48 billion, falling below even the lowest of analyst estimates. Gross margins also disappointed analysts, with the company reporting a 23% margin in comparison to the expected 24.1%. Another overall sales figures have done reasonable well, the company justified some of its weak margins on tariff issues thanks to the China-U.S. trade war.
“The key question becomes how long W will have to endure top- and bottom-line headwinds before reaching an inflection point after which revenue growth re-accelerates and losses narrow,” wrote Morgan Stanley analyst Simeon Gutman, referring to the company by its ticker. “We have a relatively low level of confidence all of the issues W is contending with will be resolved in the next couple of quarters.”
While bad news for analysts and investors, short sellers have been betting against Wayfair for a while now. In fact, short interest has recently hit the highest point in the year, accounting for 27% of all available shares. Considering the fact that Wayfair has yet to turn a profit since it was founded back in 2002, it’s understandable that short sellers would target the stock. This is especially true considering the debacle with WeWork, another company that has been losing money rapidly.
Shares of Wayfair ended up falling 18.7% on Thursday in response to the news, reaching the lowest point seen since December 2018. Prior to this announcement, Wall Street analysts were mostly split on Wayfair as an investment, with around half holding a “buy” rating with the other half issuing a “neutral” hold rating. However, it wouldn’t be surprising if a few more financial experts end up downgrading the stock to a hold or possibly a “sell” in light of this news.
Wayfair Company Profile
Wayfair engages in e-commerce in the United States and Europe. At year-end, the firm offered approximately 14 million products from more than 11,000 suppliers for the home sector under the brands Wayfair, Joss & Main, AllModern, DwellStudio, Birch Lane, and Perigold. This includes a selection of furniture, decor, decorative accent, housewares, seasonal decor, and other home goods. Wayfair was founded in 2002 and is focused on helping people find the perfect product at the right price. – Warrior Trading News
