How to Play This Downtrodden Retail Stock

Wayfair stock been a target of analysts lately

Dec 16, 2021 at 12:30 PM
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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.

 

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