Wayfair stock analysis: encouraging tailwinds ahead

Wayfair (NYSE: W) stock price has been in a strong bullish trend in the past few weeks as investors bet on the company’s resurgence. The shares jumped to a high of $53.31, the highest level since February this year. They have risen by almost 80% from the lowest level in 2022.

Headwinds and tailwinds

Wayfair is a leading e-commerce company that focuses on furniture and home improvement provement products. The company’s business boomed during the pandemic as more people spent time at home and as their savings grew. Its revenue in 2020 jumped to $14.5 billion from the previous year’s $9.13 billion.

The past two years have been difficult, as inflation surged and demand for home products dropped. As a result, its revenue in 2021 dropped to $13.71 billion and in 2022 fell to $12.2 billion. It also moved from a profit of $185 million in 2020 to a loss of $131 million and $1.3 billion in 2021 and 2022, respectively.

Wayfair is yet to recover, as evidenced by the first-quarter results. Revenue dropped by 7.3% to $2.8 billion as inflation remained at an elevated level. The company hopes that demand will start to pick up this year.

There are several macro tailwinds that could benefit the company. First, there are signs that inflation in the US is easing. Data published on Tuesday showed that the country’s consumer price index (CPI) droped to 4.0%. Lower inflation could spur more spending.

Second, shipping costs have dropped sharply internationally and in the US. As I wrote in this article on ZIM Integrated, the global sea shipping costs have dropped to the lowest level since 2020. Container shipments in the US have also dropped. 

Third, the company is implementing cost cuts as it focuses on profitability. It has already announced some layoffs and is already working to reduce its SG&A expenses.

Wayfair stock price forecast

Turning to the daily chart, we see that the W stock price bottomed at $28.72. It failed to move below this price both in 2022 and earlier this year. As a result, it has formed what looks like a double bottom pattern whose neckline is at $73.94. The 25-day and 50-day exponential moving averages have made a bullish crossover pattern.

Therefore, the outlook for the Wayfair share price is bullish, with the next level to watch being at $73.94, which is 37% above the current level.