How to Play This Downtrodden Retail Stock

Wayfair stock been a target of analysts lately

Dec 16, 2021 at 12:30 PM
facebook twitter linkedin

Last fall, we profiled '8 stocks to sell now.' Specialty retailer Wayfair Inc. (NYSE:W) popped up on that list, and three months later, the stock hasn't fared much better, and sports a 15% deficit for 2021. But W is worth a closer look, especially after some recent analyst attention. 

This morning, BofA Global Research cut its rating to "underperform" from "neutral," while trimming its price target to $175 from $265. Yet at the same time, Needham initiated coverage on W with a "buy" rating and $280 price target. At last check, Wayfair stock was down 7.3% to trade at $192.02, and earlier hit an annual low of $191.26.

Overall, the brokerage bunch leans bearish, with 60% of analysts in coverage maintaining "hold" or "strong sell" ratings. But more price-target cuts could be in store, considering W's 12-month consensus price target of $281.63 is no a 47% premium to its current perch.

Fundamentally speaking, Wayfair stock continues to be a very intriguing growth play despite having a very high price-earnings ratio of 235.56. With the retail brand just beginning to see profits, a more accurate valuation metric for Wayfair stock is its forward price-earnings ratio, which happens to come in at 54.35. This signals a big improvement and expected growth in earnings.

Additionally, Wayfair stock’s bearish run this past year has pushed its price-sales ratio down to 1.51, which is an extremely attractive value considering that the retail company’s revenues are up by nearly 200% since fiscal 2017. Overall, Wayfair stock definitely has the potential to bounce back strongly in 2022.

If you're sold on W -- no pun intended -- the stock ranks low on the Schaeffer's Volatility Scorecard (SVS), with a score of just 7out of 100. In other words, the security has consistently realized lower volatility than its options have priced in, making the stock a potential premium-selling candidate.


Stop leaving money on the table with the same old broken options trading approach...

There is no options strategy that more perfectly capitalizes during earnings season better than this simple call and put buying strategy. Perfect for aggressive traders looking to recover their suffering portfolios so far in 2022. With the simplest possible options strategy, Schaeffer's team with 100+ years of options trading excellence, target 200% gains on every single trade. So many trades are being beaten down by the market, but don't be one of them! Don't waste another second... join us right now before the next trade is released! 

Best stocks for October and worst stocks for October


Special Offers from Schaeffer's Trading Partners