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A month has gone by since the last earnings report for Wayfair (W). Shares have lost about 10.2% 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 its most recent earnings report in order to get a better handle on the important drivers.
Wayfair Surpasses Q3 Earnings and Revenue Estimates
Wayfair Inc. reported third-quarter 2020 non-GAAP earnings of $2.30 per share, which surpassed the Zacks Consensus Estimate of 81 cents.
Total revenues came in at $3.84 billion, up 66.5% year over year. Also, the figure surpassed the Zacks Consensus Estimate by 4.2%.
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 year-over-year revenue growth.
Quarter in Detail
Direct retail net revenues — including sales generated primarily through Wayfair’s sites — were $3.8 billion, which increased 66.4% year over year.
Net revenues in the United States increased 66.5% year over year to $1.3 billion, while international net revenues grew 66.7% to $225.9 million.
Active customers increased 51% from the prior-year quarter to 28.8 million. Moreover, LTM net revenues per active customer increased 0.4% year over year to $451 million.
Total number of orders delivered in the reported quarter was 15.8 million, up 72.8% year over year. In addition, orders per customer for the quarter were 1.94 million, reflecting an increase of 4.9% from the year-ago period. Further, repeat customers placed 11.3 million orders in the third quarter, up 84.4% year over year.
For the third quarter, Wayfair’s gross margin was 29.9%, up 650 basis points on a year-over-year basis.
Adjusted EBITDA margin was 9.7% versus (6.3%) in the year-ago quarter.
The company’s operating expenses of $925.6 million increased 15.8% year over year. Operating income was $221.9 million versus the prior-year loss of $259.7 million.
Balance Sheet & Cash Flow
At third quarter-end, cash, cash equivalents and short-term investments were $2.6 billion, up from $2.4 billion in the prior quarter. Accounts receivables were $109.7 million, down from $119 million in the second quarter.
Cash from operations was $331 million and capital expenditure totaled $41.5 million. Free cash flow was $255 million compared with $105 million in the second quarter.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 184.12% due to these changes.
Currently, Wayfair has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
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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