Wayfair Stock Price Crashes 21% On Deepening Losses

Wayfair Stock Price Crashes 21% On Deepening Losses
Written by:
Michael Harris
1st March, 15:07
Updated: 3rd April, 04:41
  • Adjusted earnings: loss of $2.80 per share vs loss of $2.65 per share
  • Annual loss almost doubled to $985 million, despite the 25% growth in revenues
  • Last month, Wayfair announced it is cutting 3% of its workforce

Shares of online furniture retailer Wayfair fell more than 21% this week on the back of the stock market selloff and annual net loss that almost doubled to nearly $1 billion.

Fundamental analysis: Same old issues

Wayfair reported adjusted losses of $2.80 per share, higher than losses of $2.65 expected from the market analysts. A year ago, the online furniture retailer reported losses of $143.85 million, while this year the loss has more than doubled to $330.22 million.

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The company reported an annual loss of $985 million.

“We are pleased to close out another year of significant growth with net revenue up 35% year over year in 2019, as our loyal and growing customer base continues to choose Wayfair as the preferred place to shop for home,” said Niraj Shah, CEO, co-founder and co-chairman of Wayfair.

Revenue grew more than 25% to $2.53 billion in the fourth-quarter, which is in line with analysts’ expectations.

“While already operating at a run rate in excess of $10 billion in annual net revenue, we have barely scratched the surface of our total addressable market and are only just beginning to reap the benefits of our large strategic investments across North America and Europe,” added Shah.

Wayfair’s long-standing problem is profitability. The company struggles to make money despite a continuous rise in revenues. Last month, the retailer announced it is cutting 500 jobs or 3% of its total workforce.

“We continually evaluate the needs of the business and work to increase efficiencies while aligning our teams with the initiatives that drive the greatest impact for our customers,” the company said in a statement.

Shares of Wayfair are down 29% this year. Compared to the end of February last year, the stock price crashed nearly 62%.

Technical analysis: Extensive selling pressure

Looking at the price action below, we see that the stock price has been under continuous selling pressure since the beginning of last year. The company’s inability to control mounting losses has translated into a bearish price action for Wayfair.

Wayfair stock weekly chart (TradingView)

Following the months of continuous decrease in the stock price, shares hit a low of $52.41 this week, the lowest the Wayfair stock price has traded since May 2017. The bears are likely to target the $50 handle next.

On the upside, a sudden buying of Wayfair stock may take the price action to the levels around the $80 mark, which plays a very important role in the price developments.

Summary

Shares of Wayfair have lost further 21% this week, totaling more than 60% of losses since the beginning of previous year on the back of the company’s struggles to become profitable. This week’s stock price is the lowest the shares have traded since May 2017.

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