Wayfair Takes Big Earnings Hit, Citron Stays Short

Wayfair Inc W shares dropped more than 17% on Thursday after the company reported a much larger-than-expected loss for the third quarter.

Despite growing revenue by 35% in the third quarter, the online furniture and home decor retailer disappointed Wall Street with its $2.23 EPS loss and fourth-quarter sales guidance of between $2.48 billion and $2.52 billion.

The report sent Wayfair shares to their lowest level in almost a year, but some opportunistic traders made a killing off of the earnings move.

A Trouble Spot

On Wednesday, Jon Najarian’s MarketRebellion reported that alternative data from SimilarWeb suggested international web traffic “seems to be a trouble spot” for Wayfair.

“Even though Wayfair’s site is experiencing YOY growth in converted visits and its app is experiencing strong growth in all three international markets, paid search is not only continuing to account for a large percentage of traffic to the company’s international sites, but is also experiencing YOY growth,” Najarian wrote ahead of the earnings print.

Left Staying Short

Citron Research’s Andrew Left has been a Wayfair bear since all the way back in 2016. On Thursday, Left told Benzinga that even after the stock’s 48% decline in the past six months, Wayfair is still his largest short position. Left also said Wayfair remains overvalued, and there’s a valid argument to be made that the company has “no value.”

Left had a big day on Thursday, but the stock is still up more than 700% since he told Benzinga there is “nothing about this company that is even worth a billion dollars” in November 2016. Today, Wayfair’s market cap stands at about $7.7 billion.

Benzinga’s Take

Wayfair is one of many growth stocks that are putting up strong revenue numbers but struggling to generate profits as costs continue to rise. Until Wayfair demonstrates it has a viable long-term business model, its near-term valuation upside is likely capped.

The stock traded around $83.55 per share at time of publication.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

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