Wayfair (W) stock price has remained under pressure in the past few years as concerns about weak consumer spending remain. It was trading at $52.67 on Friday, down by over 41.8% from its highest point in July 2023 and 86% from its all-time high during the pandemic.
Weak consumer spending
Wayfair shares were among the top beneficiaries of the Covid-19 pandemic as more people stayed at home. At the time, surging demand for home furniture and decor pushed its stock to a record high and its market cap to over $35.86 billion.
This trend reversed after the pandemic as demand waned and as inflation jumped to a multi-year high. It also happened as many investors moved from pandemic winners like PayPal, Block, Zoom Video, Moderna, and Novavax.
As a result, Wayfair has moved from a high-growth company to one that is struggling to achieve single-digit revenue growth. Data shows that its revenue moved from $9.12 billion in 2019 to a peak of $14.1 billlion in 2020.
After that, its revenue dropped to $13.7 billion in 2021 to $12.2 billion and $12 billion in the following two years. Analysts expect that Wayfair’s revenue will slip to $11.8 billion this year and then bounce back to $12.3 billion in 2023.
The company’s key challenge is that consumer spending, especially in the furniture and decor industry has been significantly weak as interest rates have remained high in the past few years.
With inflation and interest rates high, most people shifted to consumer staples items like food instead of discretionary like furniture. In the last financial results, Niraj Shah, Wayfair’s CEO said:
“Customers remain cautious in their spending on the home, and our credit card data suggests that the category correction now mirrors the magnitude of the peak to trough decline the home furnishing space experienced during the great financial crisis.”
Therefore, there is a likelihood that the company will receive a boost as interest rates start falling and home sales pick up. The challenge, however, is that it will take several rate cuts for rates to move back to where they were before the pandemic.
Wayfair earnings download
The most recent financials showed that Wayfair’s revenue was $3.1 billion, down from $3.17 billion in the same period in 2023. Its half-year revenues dropped from $5.9 billion in 2023 to $5.8 billion.
These results revealed that Wayfair had 22 million customers, a small increase while the number of orders delivered in the second quarter fell to 10 million. The average order value rose to $313 as the company hiked prices because of inflation.
Wayfair is still losing money, which explains why the management decided to lay off 13% of its total workforce earlier this year. Its net loss in the last quarter was $42 million, an improvement from the $46 million it lost in 2023.
Data by SimilarWeb shows that website to its traffic and applications has dropped recently. Total visits in August stood at 89.5 million, down by almost 6% from the previous month, meaning that the challenges in the industry continued.
I believe that Wayfair will need to boost its marketing spend to deal with the elevated competition and industry challenges.
Analysts have mixed opinions about the Wayfair stock. The most recent note was from Argus Research who downgraded the stock from buy to hold. Other analysts from Barclays, JP Morgan, and RBC Capital have an equal-weight, overweight, and sector perform, respectively. The average Wayfair stock price forecast among analysts is $62.87, higher than the current $52.50.
Wayfair stock price analysis
The weekly chart shows that the Wayfair share price has moved sideways since 2022. It has remained inside the key support level at $29.10 and the resistance level at $91. There are signs that it has struggled to drop below that support point.
Wayfair is consolidating at the 50-week and 25-week Exponential Moving Averages (EMA). Also, the Average True Range (ATR) has moved upwards, signaling that some investors are slowly accumulating the shares.
Therefore, the stock will likely start to bounce back in the next few months as investors target the next key resistance point at $75, its highest point in May this year. This rebound will likely happen ahead or after its next financial results on November 1.
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