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Wayfair (W) Q4 Loss Narrower Than Anticipated, Revenues Beat

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Wayfair Inc. W reported non-GAAP loss of $1.12 per share in the fourth quarter of 2018, narrower than the Zacks Consensus Estimate of $1.24 and the year-ago figure of $1.28.

Total fourth-quarter revenues came in at $2.01 billion, up 39.9% year over year. The figure also outpaced the Zacks Consensus Estimate of $1.88 billion.

The year-over-year increase in revenues was driven by strengthening of the company’s direct retail business across international regions.

Following the earnings release, its shares increased more than27%.

Quarter in Detail

The company’s direct retail net revenues, which include sales generated primarily through Wayfair’s sites, were $1.996 billion in the fourth quarter, increasing 40.6% year over year.

Active customers increased 37.9% from the prior-year quarter to 15.2 million. Also, LTM net revenues per active customer increased 5% year over year to $443 million.

Total number of orders delivered in the reported quarter was 8.8 million, up 42% year over year. Orders per customer in the quarter were 1.85 million, reflecting an increase of 4% from the year-ago period. Further, repeat customers placed 5.8 million orders in the fourth quarter, up 51.1% year over year.

Operating Results

In the fourth quarter, Wayfair’s gross margin was 24.1%, up 100 basis points on a year-over-year basis.

Adjusted EBITDA margin was (2.7%) million compared with (1.5%) in the year-ago quarter. This was led by increasing investments, mainly in the international regions.

The company’s operating expenses of $614.7 million increased 53.7% year over year. Operating loss came in at $142.8 million, which was wider than the prior-year quarter’s $73 million.

Balance Sheet & Cash Flow

At the end of fourth quarter, cash, cash equivalents and short-term investments were $963.7 million, up from $518.7 million in the comparable year-ago period. Accounts receivables were $50.6 million, up from $41 million in the third quarter.

Cash from operations was $42.5 million and capital expenditure totaled $48.7 million. Free cash flow was ($23.2) million compared with ($58.8) million in the third quarter.

Zacks Rank and Stocks to Consider

Wayfair currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector include Expedia Group, Inc. EXPE, AMETEK, Inc. AME and Inphi Corporation (IPHI - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth rate for Expedia, AMETEK and Inphi is projected to be 13.4%, 9.6% and 18.5%, respectively.

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