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Wayfair Inc Class A W

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Morningstar’s Analysis

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Wayfair Sales Fall Lapping Initial Coronavirus-Related Demand; Trend Above 2019 Levels; Shares Rich

Jaime M. Katz, CFA Senior Equity Analyst

Analyst Note

| Jaime M. Katz, CFA |

We plan to raise our $112 fair value estimate for no-moat Wayfair by a mid-single-digit clip after incorporating sales that fell 10% (to $3.9 billion) and an adjusted EBITDA margin of 8% (down from 10.2% in the year-ago period). In our opinion, these metrics are far from disappointing, marking a 64% increase in sales over the second quarter of 2019 and significantly improved profitability (the second quarter 2019 adjusted EBITDA margin was negative 3%). The current period displayed mean reverting behavior with respect to spend across categories (away from furniture and back to travel and leisure), which we expected to occur as the economy reopened, and guidance implies such trends may continue. In particular, Wayfair offered third-quarter projections that included sales below first- and second-quarter levels (implying another double-digit decline), a gross margin of 27%-28% (versus 29% in the past three quarters), and a low-single-digit EBITDA margin (versus 10% in the third quarter of 2020).

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Company Profile

Business Description

Wayfair engages in e-commerce in the United States and Europe. As of June 30, 2021, the firm offered approximately 22 million products from more than 16,000 suppliers for the home sector under the brands Wayfair, Joss & Main, AllModern, DwellStudio, Birch Lane, and Perigold. This includes a selection of furniture, decor, decorative accent, housewares, seasonal decor, and other home goods. Wayfair was founded in 2002 and is focused on helping people find the perfect product at the right price.

4 Copley Place
Boston, MA, 02116
T +1 617 532-6100
Sector Consumer Cyclical
Industry Internet Retail
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Cyclical
Employees 16,122