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Over the past five years, Wayfair (W) has transformed its technology stack through comprehensive re-platforming and migration to the cloud. As part of this evolution, the company laid off approximately 340 employees.
In a move to optimize operations, Wayfair has also streamlined its technology development center (TDC) footprint, which led to the closure of its Austin, Texas-based TDC.
With over 2,500 technologists, Wayfair continues to invest in technology to drive its strategic priorities aggressively. These efforts could position the company for long-term success in an evolving retail landscape. As this focus intensifies, let us unveil if this makes Wayfair’s stock a potential buy now.
About Wayfair Stock
Headquartered in Boston, Massachusetts, Wayfair (W) is a leading global online retailer of home goods specializing in furniture and home decor. With a market cap of around $4.1 billion, the company operates through its flagship site, Wayfair.com, along with four other branded websites: Joss & Main, AllModern, Birch Lane, and Perigold.
The company has built a strong foundation by delivering furniture and home goods directly from suppliers through an efficient logistics network. It also stands out for its technological expertise, utilizing a comprehensive platform to personalize customer experiences and streamline supplier management.
However, despite its strong business model, W has declined roughly 28% so far this year.
However, what strengthens Wayfair’s case at the moment is that its stock seems undervalued. The company’s price-to-sales multiple of 0.33x is lower than both its sector average of 0.87x and its own five-year average of 1x, suggesting the potential for a rebound in the future.
A Closer Look at Wayfair’s Q4 Earnings
The home goods e-commerce company released its fourth-quarter earnings on Feb. 20, surpassing Wall Street forecasts for revenue. It posted net revenue of $3.12 billion for the quarter, reflecting a slight year-over-year improvement and beating expectations of $3.07 billion. The growth was driven primarily by modest performance in the U.S. segment, which grew by 1.1% from the year-ago value to $2.7 billion.
Adjusted EBITDA rose 4.3% from the previous year’s quarter to $96 million, driven by operational efficiencies despite stronger competition and market fragmentation. The emphasis on higher-value transactions was clear, with the average order value rising 5.1% to $290, which helped offset a 5.3% decline in total orders delivered.
Wayfair’s strategic initiatives also played a key role in boosting free cash flow, which grew to $102 million, up from $62 million the previous year. However, the company’s adjusted loss per share widened by 127.3% year-over-year, reaching $0.25 and falling short of the Wall Street estimate for a loss of $0.01 per share.
Looking forward, for the first quarter of 2025, management projects revenue to be flat to slightly down year-over-year. It has also guided for a gross margin range of 30% to 31%, aiming to be closer to the midpoint for the first quarter. Adjusted EBITDA margin is expected to remain in the 2% to 4% range.
Analysts tracking Wayfair anticipate the company’s loss could narrow by 35.5% in the first quarter of 2025, with a 32.7% reduction for the full year 2025, indicating potential for recovery and growth ahead.
What Do Analysts Expect for Wayfair Stock?
Wayfair’s decision to lay off several technology employees seems to be part of a broader restructuring following the completion of its technology re-platforming. The company expects to see savings from this reduction in the second half of 2025, with further financial benefits projected for 2026.
Against this backdrop, analysts remain optimistic about Wayfair. Citigroup has kept its “Buy” rating and $58 price target, while Morgan Stanley anticipates savings of $30 million to $60 million from the workforce reduction and maintains an “Overweight” rating with a $72 price target.
Overall, Wall Street remains somewhat bullish on W, with a consensus rating of “Moderate Buy.” Of the 31 analysts covering the stock, 15 recommend a “Strong Buy,” while two suggest a “Moderate Buy.” Meanwhile, 14 recommend a “Hold.” The average price target of $55.21 represents potential upside of 73%, while the Street-high target of $100 suggests that the stock can climb as much as 213% from the current price level.
