Personal Finance
W

Why Wayfair Inc. Stock Tumbled Today

What happened

Shares of Wayfair Inc. (NYSE: W) were heading lower today after the online furniture seller posted a wider-than-expected loss in its fourth-quarter earnings report. The market looked past strong revenue growth, instead focusing on the company's bottom-line result and sending the stock down 21.2% as of 10:57 a.m. EST.

A tan living room set with aqua pillows from Wayfair brand Joss & Main, in a light blue room.

Image source: Wayfair.

So what

The e-commerce home-goods specialist continued to deliver impressive sales growth as revenue increased 46% to $1.44 billion, beating estimates of $1.36 billion. Active customers climbed 33% to 11 million, and average order size jumped from $203 to $229. However, gross margin declined from 24.2% in the quarter a year ago to 23.1%, a sign that competition may be intensifying, thereby bringing down prices. As a result, the company's loss per share expanded from -$0.51 to -$0.83, which was worse than analyst expectations at -$0.53.

CEO Niraj Shah touted the company's "incredible growth," saying, "Our long-term investing approach and customer-centric mentality continue to pay off as we outpace the shift to online spending in our category and gain significant market share." However, he did not address the widening bottom-line loss.

Now what

Looking ahead, Wayfair said expected revenue of $1.315 billion-$1.345 billion in the current quarter, up 40%-43% from last year, and ahead of estimates of $1.29 billion, but the company also said that EBITDA could be negative for the first time in a year, indicating that the bottom line will continue to be challenged.

Separately, Walmart announced that it would launch a new home-goods site, indicating that competition in the industry is heating up. Wayfair's revenue growth is certainly impressive, as the company is on its way to more than $6 billion in revenue this year, but investors are justified in expecting progress toward profitability. After the stock more than doubled last year, it's not surprising to see higher investor expectations.

10 stocks we like better than Wayfair

When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Wayfair wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of February 5, 2018

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Wayfair. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

W

Other Topics

Stocks

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More