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Wayfair (W) Down 11.8% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Wayfair (W - Free Report) . Shares have lost about 11.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Wayfair due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Wayfair Surpasses Q2 Earnings and Revenue Estimates

Wayfair Inc. reported second-quarter 2020 non-GAAP earnings of $3.13 per share, which surpassed the Zacks Consensus Estimate of $1.02.

Total revenues came in at $4.30 billion, up 83.7% year over year. Also, the figure surpassed the Zacks Consensus Estimate by 5.8%.

The increase in revenues was driven by strong acceleration in new and repeat customer orders. Also, increase in active customers and strength in the company's direct retail business aided the year-over-year revenue growth.

Quarter in Detail

Direct retail net revenues — including sales generated primarily through Wayfair’s sites — were $4.3 billion, which increased 84.2% year over year.

Active customers increased 46% from the prior-year quarter to 26 million. However, LTM net revenues per active customer decreased 1.6% year over year to $440 million.

Total number of orders delivered in the reported quarter was 18.9 million, up 106.2% year over year. In addition, orders per customer for the quarter were 1.89 million, reflecting an increase of 1.6% from the year-ago period. Further, repeat customers placed 12.7 million orders in the second quarter, up 104.9% year over year.

Operating Results

For the second quarter, Wayfair’s gross margin was 30.7%, up 680 basis points on a year-over-year basis.

Adjusted EBITDA margin was 10.2% compared with (3%) in the year-ago quarter.

The company’s operating expenses of $1.02 billion increased 39.7% year over year. Operating income was $274.2 million, wider than the prior-year loss of $181.1 million.

Balance Sheet & Cash Flow

At second quarter-end, cash, cash equivalents and short-term investments were $2.4 billion, up from $891 million in the prior quarter. Accounts receivables were $119 million, up from $110.3 million in the first quarter.

Cash from operations was $1.14 billion and capital expenditure totaled $44.8 million. Free cash flow was $1.05 billion compared with ($354.6) million in the first quarter.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 120.83% due to these changes.

VGM Scores

At this time, Wayfair has a great Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Wayfair has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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