Shares of Wayfair (NYSE: W), the online home furnishings retailer, were among the losers on the stock market this week. News on the company itself was minimal, but the Fed’s decision to trim its rate-cut forecast for next year — from four cuts to two — hit interest-rate-sensitive stocks like Wayfair hard.
As of 11:59 a.m. ET, the stock was down 15.5% for the week, according to data from S&P Global Market Intelligence.
Start Your Mornings Smarter! Wake up with Breakfast news in your inbox every market day. Sign Up For Free »
Image source: Getty Images.
Wayfair has struggled since the end of the pandemic, as the housing market has been weak and its pandemic-driven surge is over.
Investors have looked forward to a recovery in the housing market to recharge the stock, but it now seems like that’s going to take longer than hoped.
In a broad sell-off yesterday, driven by the Fed’s change in its rate-cut forecast, Wayfair stock fell 9.9%, and it’s not hard to see why. High mortgage rates have cooled off the housing market, which has weighed on home furnishings companies like Wayfair, as home purchases tend to lead to furniture purchases.
Wayfair is also in a weaker position than many of its peers, as it’s not profitable on the basis of generally accepted accounting principles (GAAP). It had a net loss of $74 million in the third quarter, and its revenue fell 2% to $2.9 billion.
With results like that, something in the business needs to change.
Wayfair is profitable on the basis of adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), and the company is focused on driving that figure higher.
The company has cut costs through layoffs and other initiatives in recent years, but it seems unlikely to return to significant revenue growth without help from the macro environment.
While the Fed’s forecast is just a forecast, investors hopeful for a housing recovery may have to be patient.
Before you buy stock in Wayfair, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Wayfair wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $790,028!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of December 16, 2024
Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool recommends Wayfair. The Motley Fool has a disclosure policy.
—
Blog powered by G6
Disclaimer! A guest author has made this post. G6 has not checked the post. its content and attachments and under no circumstances will G6 be held responsible or liable in any way for any claims, damages, losses, expenses, costs or liabilities whatsoever (including, without limitation, any direct or indirect damages for loss of profits, business interruption or loss of information) resulting or arising directly or indirectly from your use of or inability to use this website or any websites linked to it, or from your reliance on the information and material on this website, even if the G6 has been advised of the possibility of such damages in advance.
For any inquiries, please contact [email protected]
