Is Now the Time to Buy the Dip on Wayfair Stock?

The e-commerce stock has added 23% in just the past six months

Jan 11, 2021 at 12:09 PM
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Wayfair, Inc. (NYSE:W) is an American e-commerce company that sells home furniture, decor, home improvement products, housewares, and other home-goods. Their platform offers millions of items from more than 11,000 global suppliers. The company also has offices and warehouses throughout the United States, Canada, Germany, Ireland, and the United Kingdom.

This past summer, Wayfair was tied into a conspiracy that had accused the company of human trafficking through its e-commerce platform. Maybe not so surprisingly, the negative publicity ended up having little to no effect on W stock price. Wayfair stock even peaked at a record-high of $349.08 about a month after the controversy broke, on Aug. 24. Since reaching this peak W has shed 26%, but so far this year, Wayfair stock has already tacked on 15%.

WDaily

In more recent news, Wayfair announced that all of its U.S. employees would now make at least $15 per hour. According to Wayfair, the change meant a pay increase for more than 40% of its hourly employees working across its U.S. supply chain and customer service operations.

Despite a pretty painful year for most retail stocks in 2020, Wayfair was able to outperform Wall Street's expectations on most of its earnings reports last year. The only earnings miss was when the company reported its earnings for the fourth quarter of 2019. For the earnings reports focused on the first, second, and third quarters of 2020, Wayfair beat expectations by a margin of $0.30, $2.09, and $1.50, respectively. Analysts currently anticipate that Wayfair stock will report earnings of $0.80 per share for the fourth quarter of 2020.

Wayfair has exponentially grown its revenue in recent years, but did take a step back in its growth over the past 12 months. The company saw an annual revenue decrease of approximately $600 million, which is surprising given the current retail climate. The Covid-19 pandemic has allowed for e-commerce to flourish, which indicates that investors should be wary of Wayfair’s drop in sales over this time period.

From a fundamental point of view, Wayfair is entirely too inconsistent in its growth, and offers a lot of risk to potential investors. However, Wayfair stock price has been down-trending since the summer and is still down considerably since its peak. If Wayfair stock continues its bearish form, investors may be able to pick up this risk-laden stock at a very attractive price.

For those looking to speculate on Wayfair stock's next move with options, now seems like the ideal opportunity. The equity's Schaeffer's Volatility Index (SVI) of 63% sits in the 13th percentile of its annual range, meaning options players are pricing in low volatility expectations right now. 

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