Home décor e-tailer Wayfair (NYSE:W) stock is up more than 240% so far in 2020. But with heavy competition from more established e-commerce names, should investors be taking their profits now from Wayfair stock?
Not by a long shot.
Wayfair is an up-and-coming name in the e-commerce space. And with e-commerce capitalizing on newfound popularity and changing shopping habits thanks to the novel coronavirus, investors can expect plenty of growth in Wayfair stock.
Therefore, we are nowhere close to popping the bubble on Wayfair stock.
Wayfair at a Glance
It’s hard to believe that Wayfair has been around for nearly 20 years. The Boston-based company, formerly called CSN Stores, went public in August 2014 at $29 per share.
But the early days as a publicly traded company weren’t easy. Wayfair stock stayed stubbornly below $100 until 2018. And overall, didn’t really start to take off until the novel coronavirus pandemic changed shopping habits forever.
Suddenly, people found themselves living under stay-at-home orders as Covid-19 swept unchecked around the globe. In turn, shutting down brick-and-mortar retail stores and requiring people to work from home instead of going to the office was one of the best ways that people could flatten the curve of infections.
The end result is that people started spending at lot of time at home. And with nothing to do but look at the walls around them, some home fixer-upper projects seemed to be in order for millions of homeowners.
That said, Wayfair stock became one of the hottest stocks on Wall Street, shooting from a low of $21 in March to more than $340 per share.
And Wayfair seems to have some staying power. While the stock slipped along with much of the greater market in September, it is now making up much of that ground and is again approaching all-time highs.
CEO Niraj Shah said the second quarter was exceptionally strong for Wayfair, thanks to the explosion of e-commerce brought on by the pandemic:
“Q2 demonstrated that Wayfair is now a meaningful, well-recognized and trusted household brand. Millions of customers, new and loyal, are seeking us out when their attention is on their homes. They’re turning to Wayfair as they explore how to use their homes in new ways and see comfort in them during highly uncertain times. Q2 demonstrated the wisdom of our strategic investments and the returns that they can generate.”
For the quarter, Wayfair posted revenue of $4.3 billion, which was better than Wall Street’s expectations of $4.06 billion. That marked an 83% increase from the same quarter a year ago.
Additionally, adjusted earning per share were $3.13 — much better than the $1.04 predicted by analysts. A year ago in the same quarter, Wayfair reported earnings of $1.35 per share.
That quarterly profit was particularly welcome considering that Wayfair, while growing quickly, hasn’t turned a profit in recent years. And while the company hasn’t issued guidance for 2020, analysts are still expecting Wayfair stock to post a full-year loss of $3.44 per share, on revenue of $12.91 billion.
Wayfair Stock Is a Risk Worth Taking
Earlier this summer, I published a list of risky, high-rated stocks that I thought were worth a good gamble. And No. 1 on that list was Wayfair stock.
You may recall that I said in that June article that Wayfair would be a good investment if it can absorb losses long enough to establish itself as a meaningful competitor to other e-commerce stocks, such as Amazon (NASDAQ:AMZN), eBay (NASDAQ:EBAY) and Etsy (NASDAQ:ETSY).
That said, Wayfair’s blowout second quarter shows that the company is on the right track to making that happen. Thus, it appears that the risk I outlined in June is going to pay off for investors.
The Bottom Line on Wayfair Stock
U.S. consumers spent more than $200 billion online in the second quarter — a number that’s up more than 44% from the previous year.
That’s not going to change. People will find e-commerce more convenient — and in the age of the pandemic, a safer choice. Meanwhile, more than 20 major retailers declared bankruptcy just this year, giving shoppers fewer choices.
However, those are tailwinds that will benefit e-commerce retailers like Wayfair. And that’s a good thing for investors in Wayfair stock.
Wayfair stock has an “A” grade and a strong buy recommendation in my Portfolio Grader right now.
On the date of publication, Louis Navellier and the InvestorPlace Research Staff member primarily responsible for this article held long positions in AMZN. Neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any other positions in the securities mentioned in this article.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation.