A month has gone by since the last earnings report for Wayfair (W). Shares have lost about 4.9% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Wayfair due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Wayfair’s Q1 Loss Wider Than Anticipated, Revenues Beat
Wayfair Inc. reported non-GAAP loss of $1.62 per share in first-quarter 2019, wider than the Zacks Consensus Estimate of a loss of $1.60 and the year-ago loss of 91 cents.
Total first-quarter revenues came in at $1.95 billion, up 39.9% year over year. The figure also outpaced the Zacks Consensus Estimate of $1.92 billion.
The year-over-year increase in revenues was driven by strengthening of the company’s direct retail business across international regions.
Direct retail net revenues from the company’s international segment in Canada, U.K. and Germany increased 42% year over year to $287 million (or up 51% on a constant-currency basis).
Although the Canadian business has been facing growth headwinds due to exchange rate and weaker consumer spending, management expects growth to accelerate in the near term due to logistics operations, allowing Wayfair to reduce its cost structure.
Quarter in Detail
The company’s direct retail net revenues, which include sales generated primarily through Wayfair’s sites, were $1.9 billion in the first quarter, increasing 39% year over year.
Active customers increased 39% from the prior-year quarter to 16.4 million. Also, LTM net revenues per active customer increased 2.3% year over year to $442 million.
Total number of orders delivered in the reported quarter was 8.2 million, up 38.6% year over year. In addition, orders per customer in the quarter were 1.85 million, reflecting an increase of 3.4% from the year-ago period. Further, repeat customers placed 5.4 million orders in the first quarter, up 42.3% year over year.
In the first quarter, Wayfair’s gross margin was 24.2%, up 110 basis points on a year-over-year basis.
Adjusted EBITDA margin was (5.3%) million compared with (3.6%) in the year-ago quarter. This was led by increasing investments, mainly in the international regions.
The company’s operating expenses of $664.1 million increased 55.6% year over year. Operating loss came in at $119.8 million, which was wider than the prior-year quarter’s loss of $103.1 million.
Balance Sheet & Cash Flow
At the end of the first quarter, cash, cash equivalents and short-term investments were $805.7 million, down from $963.7 million in the comparable year-ago period. Accounts receivables were $60.6 million, up from $50.6 million in the fourth quarter.
Cash from operations was ($81.3) million and capital expenditure totaled $60.6 million. Free cash flow was ($166.8) million compared with ($23.2) million in the fourth quarter.
How Have Estimates Been Moving Since Then?
Fresh estimates followed a downward path over the past two months. The consensus estimate has shifted -14.18% due to these changes.
At this time, Wayfair has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Wayfair has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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