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Wayfair stock soars on job cuts, JPMorgan double upgrade

Yahoo Finance Live anchors discuss the rise in stock for Wayfair following a JPMorgan upgrade.

Video Transcript

BRAD SMITH: Great stuff. Also--

JULIE HYMAN: It sounded really exciting.

BRAD SMITH: Some more exciting stuff, a double upgrade for Wayfair, as JPMorgan upgrades the retailer to overweight from underweight, citing management's newfound commitment to controlling expenses and investments. In layman's terms, they're announcing layoffs. And this comes after Wayfair joined the long growing list of companies announcing those layoffs as they are expected to cut back 10% of its staff here.

And so within this for Wayfair, just to put some other numbers on that, it's about 10% of its workforce, as we mentioned. 1,750 employees is what that adds up to. And for Wayfair, it does also come at a time where even in the most recent retail sales data, we continue to see this month over month weakness in some of the home furnishing categories as well. That was one of the categories that declined by about 2 and 1/2%.

And then even if you add in the month over month decline that we saw in department stores that saw a move lower of about 6 and 1/2% month over month, a lot of those department stores are also retailers or wholesale partners for some of the home furnishings, too. And so Wayfair, of course, on the other side of that, tries to break that up and really go directly to market through their e-commerce platform. But it's really more about the appetite of the consumer to buy at these prices.

BRIAN SOZZI: This is a big move by Wayfair off of this. And it's just another tech company, I think, obviously laying people off, but you lay people off, you boost your profit margins. The market is rewarding this, so which makes me--

JULIE HYMAN: Well, by the way--

BRIAN SOZZI: --think you're going to see more names like this.

JULIE HYMAN: The stock was already up 20% on Friday--


JULIE HYMAN: --when it actually made the layoff announcement. And then it's getting these two double upgrades from JP Morgan and Bank of America, so another 20%. What's interesting is, in particular, with this JP Morgan call, is, it doesn't seem to be that much based on the layoffs. It, rather, seems to be based more on the perceived strength of the brand. There was this-- Wayfair was obviously one of the companies that did well during the pandemic, as people were ordering things at home. Then the stock plunged as we got that correction.

And the analysts here seems to be saying that the company's brand is still strong. It remains relevant in the industry. And it has been too punished, unduly punished, as you can see from that stock chart, from this-- the post-pandemic hangover. So it's kind of an interesting call here. Yes, I mean, costs are certainly part of it. But it's interesting that the thesis here doesn't seem to be centralized on the cost of that.

BRIAN SOZZI: Well, one of the components of this upgrade was trough valuation, but that's no longer in play, Julie, in just seeing those two gains on Friday and then today as well.