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Bull of the Day: Wayfair (W)

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Tracey Ryniec
·3-min read
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Wayfair Inc. (W) is one of the big COVID-19 retail winners, but can the magic last? This Zacks Rank #1 (Strong Buy) is expected to grow sales by the double digits this year.

Wayfair is an online home products retailer that operates several brands including Wayfair, Joss & Main, AllModern, Birch Lane, and Perigold in the United States and Europe.

A Q1 Beat That Shook the Market

On May 5, Wayfair reported its first quarter results and beat the Zacks Consensus by 9.5%. Earnings were a loss of $2.30 versus the Zacks Consensus of a loss of $2.54.

But it was the surge in revenue that excited Wall Street. Net revenue jumped 19.8% to $2.3 billion as shelter-in-place purchases soared.

The consumer WAS buying during the pandemic.

U.S. net revenue was up 19.1% while International jumped 23.7%.

Non-GAAP free cash flow was a negative $354.6 million.

At the end of the first quarter, cash, cash equivalents, and short- and long-term investments were $891 million.

Analysts Raise Full Year Estimates

The analysts are bullish as consumers have taken to online shopping during the lock down and home is where the heart is.

16 estimates were revised higher for the full year in the last 2 months which pushed the Zacks Consensus Estimate up to a loss of $4.23 from a loss of $9.62 just 90 days ago.

They are bullish on 2021 as well as the Zacks Consensus jumped up to a loss of $3.12 from a loss of $8.32 in the last 90 days.

Sales are now expected to jump to $12.47 billion up from $9.13 billion last year, which is growth of 36.7%.

Too Hot to Handle?

Wayfair shares have been among the big winners this year. They are up 122% year-to-date, but the bounce off the March bottom has been even more striking.

Over the last 3 months, shares are up 554%.

Is it too hot to handle?

The company has never made money and isn't expected to this year or next. Many are asking, if it can't make money when everyone is buying online during a pandemic, when will it?

It's market cap of $19 billion dwarfs that of profitable competitors like Williams-Sonoma (WSM), another Zacks Rank #1 (Strong Buy) which has a market cap of $6.6 billion.

But if you're playing the momentum, there are few stocks with as much momentum in 2020 as Wayfair.

[In full disclosure, the author of this article owns shares of WSM in her personal portfolio.]

Zacks’ Single Best Pick to Double

From thousands of stocks, 5 Zacks experts each picked their favorite to gain +100% or more in months to come. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.

This young company’s gigantic growth was hidden by low-volume trading, then cut short by the coronavirus. But its digital products stand out in a region where the internet economy has tripled since 2015 and looks to triple again by 2025.
Its stock price is already starting to resume its upward arc. The sky’s the limit! And the earlier you get in, the greater your potential gain.

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