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Wayfair (W) Surpasses Q3 Earnings and Revenue Estimates

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Zacks Equity Research
·3 min read
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Wayfair Inc. W 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.

Following strong third-quarter results, its share price increased 7.2%.

Wayfair Inc. Price, Consensus and EPS Surprise

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

Wayfair Inc. price-consensus-eps-surprise-chart | Wayfair Inc. Quote

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.

Operating Results

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.

Zacks Rank and Stocks to Consider

Wayfair currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector include Alibaba Group Holding Limited BABA, Overstock.com, Inc. OSTK and Revolve Group, Inc. RVLV, 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 for Alibaba Group, Overstock.com, and Revolve Group is currently projected at 19.8%, 20% and 17.3%, respectively.

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