Wayfair Share Price Forecast August 2021 – Time to Buy W?

Shares of American e-commerce company Wayfair (NYSE: W) have recovered today after experiencing a significant fall last month. On July 29^th, W Shares decreased by 8% as a result of Amazon’s disappointing second-quarter report which featured Amazon’s slowest revenue growth forecast in twenty years.

Wayfair – Technical Analysis

According to the financial statement released by Wayfair, the company’s market cap is $25.255 billion with total assets worth $4.775 billion. The company earned $14.15 billion in 2020 with a profit margin of 1.31%. This is a significant increase from its 2019 revenue of $9.13 billion. The debt to assets percentage for Wayfair is at 126.08%.

Oscillators for Wayfair such as Bull Bear Power(−65.92) and Ultimate Oscillator (7, 14, 28)(36.42) are pointing towards neutral. However, moving averages such as Volume Weighted Moving Average (20)(277.66), Hull Moving Average (9)(243.2), Exponential Moving Average (200)(284.90) and Simple Moving Average (200)(289.9) are all pointing towards selling. W shares closed on August 2^nd at 19:58 UTC-4, at $242.37 with an uptrend of 0.42%.

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Recent Development

Wayfair’s recent share price decline has been attributed to the recent poor performance by Amazon, which is the leader in the online retailer’s segment. Amazon experienced its largest one-day intraday drop since May last year. This was caused by revenues lagging behind forecasts for the first time since 2018. One of the major reasons for this is the economy reopening in the U.S. This has driven consumers away from spending their time buying online which they did during the majority of the pandemic.

Wayfair shares experienced almost the same decline as Amazon due to investors expecting a disappointing second-quarter result. As people who worked from home rapidly refurbished during the pandemic, the company was uniquely positioned to capture the increased demand for furniture. The company became the major player in this sector since Amazon’s furniture business became distracted by fulfilling orders for Staples. This led to Wayfair experiencing a revenue growth of almost 84%

The company also experienced a boost in active customers in the first quarter of 2021. Repeat customers accounted for nearly three-quarters of all orders, while active customers increased by 57% during the same period. However, Wayfair’s guidance for the second quarter was vague.

Should You Buy W Shares?

Investors have to consider the fact that pandemic restrictions are slowly starting to ease, which means that shoppers are returning to physical stores. This will result in increased competition for Wayfair, which has dominated during the pandemic period. A lot will be dependant on the company’s ability to execute as demand grows. One of the key demographics the company has are Millenials which may choose other companies as its delivery systems are stretched to the limit.

Compared to some of its peers, Wayfair has experienced quite a few losses along with significant competition. Its shares have cooled down since rising quickly in the period following the Covid shutdowns. However, they have been volatile and have been near and about the 50-day MA for the past several months. Thus, taking into consideration all the above factors, W share is definitely not a buy right now.  However, it is definitely a share to keep in your wishlist as the company has a growing customer base, over ten thousand suppliers and future plans to diversify into other sectors such as appliances, flooring and plumbing.  Investors should carefully watch Wayfair and how it adjusts to the reopening of the U.S. economy which is well underway.

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