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Wayfair (W) Stock Sheds 1.5% Ahead of Earnings: What To Expect

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Shares of Wayfair (W - Free Report) lost 1.5% during regular hours Wednesday, the last day of trading before the e-commerce company releases its latest quarterly earnings report. Wayfair investors were hesitant amid an up-and-down day of trading for broader markets, but this trendy online furniture retailer is certainly still one to watch tomorrow.

Wayfair shares have surged more than 43% in the past year, with much of that momentum coming over the trailing three months. However, the stock has been battered by news that the Trump administration is levying new tariffs on furniture, and overall, the company’s shipping policies make its margins a serious long-term question.

Still, Wayfair could easily rebound from its recent volatility with a great report tomorrow. So what should investors expect to see from the company on Thursday morning? Let’s take a closer look.

Wayfair Inc. Price, Consensus and EPS Surprise

Wayfair Inc. Price, Consensus and EPS Surprise | Wayfair Inc. Quote

Earnings Outlook

Wayfair will release its Q2 fiscal 2018 results before the market opens on Thursday. Here’s what analysts are expecting, according to our Zacks Consensus Estimates.

Earnings: Wayfair is projected to post an adjusted loss of 72 cents per share. This would represent a much-wider loss than the -$0.26 cents it posted last year.

Estimate Revisions: Wayfair has seen three negative revisions to its soon-to-be-reported quarter’s EPS estimates within the past 60 days. The Zacks Consensus Estimate has slipped by seven cents in that time.

Revenue: Consensus estimates have Wayfair’s Q2 revenue pegged at $1.60 billion. This would mark growth of about 42% from the year-ago period.

Valuation

Wayfair is trading at about 1.9x trailing 12-month revenue heading into the report. This is a sharp discount compared to the industry’s average of 7.2x. Over the past year, Wayfair has traded as high as 2.2x and as low as 1.1x.

The company is still posting losses, but some believe in the power of the P/S ratio as a valuation tool for younger internet companies. Wayfair has a strong revenue stream and might look undervalued from this perspective.

Bottom Line

Wayfair has plenty of customers, and it is good at what it does. That is important in the ever-competitive world of online retail. However, the company has not proven that it can make money from its current model, and that is concerning in today’s market, which only seems to be rewarding growth stocks that can consistently surprise to the upside.

Nevertheless, if Wayfair does beat expectations and highlight its path to profitability, the stock could go soaring tomorrow.

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