PreMarket Prep Stock Of The Day: Wayfair

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

Previous price action often plays a major role in how the Street reacts to an earnings report. When an issue is on its initial rally and is constantly making new all-time-highs, there is a limited of amount of stock for sale — aside from a few investors who are taking some profits.

Yet once the issue backs off violently from an elevated level, seller's remorse emerges from those who did not take profits. More importantly, “Johnny come lately buyers" can chase an issue at extreme prices and are caught when the issue has a violent retreat. On any rebound, there investors attempting to break even or at least mitigate their loss.

This is the exact scenario in shares of Wayfair Inc. W, which is the PreMarket Prep Stock of the Day.

The Company: Wayfair engages in e-commerce in the United States and Europe. At the end of 2019, the firm offered approximately 18 million products from more than 12,000 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 and other home goods.

Wayfair's Volatile 2019: After ending 2018 at $90.08, the issue almost doubled when it peaked in March 2019 at $173.72,

For the most part, it found major sellers for the remainder of the year — coming back down below its previous year-end closing price, to $78.61 — but rebounded to end the year almost where it began, at $90.37.

More Downside, Huge Rebound For Wayfair In 2020: Wayfair cratered along with the broad market in March, falling all the way to $21.70, and then embarked on an incredible rally.

That low coincided with its March 2015 low of $21.93.

Once the issue was categorized as a stay-at-home play during coronavirus lockdowns, it exploded to the upside. Wayfair eclipsed its all-time high in May, reaching $197.08 and continuing. 

The buying frenzy didn't conclude until it peaked in August at $349.08 and retreated to the end the month at $296.56.

From that point on, Wayfair became a much more difficult issue to trade, both from the long and short side.

Wayfair Up And Down: Both September and October were volatile months for the issue. After a rally at the beginning of September that took the issue to $313.67, it plummeted to $234.65 before rallying to the end of the month at $291.01.

Early in October, Wayfair made a run at its all-time high, but came up shy, peaking at $324.41. 

Sellers then engulfed the issue, taking it to nearly its September low, but Wayfair found buyers ahead of that level at $241.68 and ended the month just above that level at $248.03.

Wayfair's Q3 Beat, Initial Spike Higher: Before the open, the company reported third-quarter adjusted EPS of $2.30, up from a $2.23 loss last year, and sales of $3.84 billion that exceeded the estimate of $3.65 billion.

Within 15 minutes of the release, Wayfair rallied from its previous day's close of $255.64 to $300.95 — and then it was lights out.

When the issue was being discussed on PreMarket Prep on Tuesday, it had backed off that high and was trading in the $283 area.

Co-host Dennis Dick did not mince words with his thoughts on the issue.

“Buy the dip and sell the rip. This is a rip to sell — it has already come off the high at the $300 area. I would not be surprised if it went red on the day,” he told PreMarket Prep listeners. 

“This is a stock that everyone has been stuck in for the past and this is a chance to get out.”

W Price Action: Wayfair has continued its volatile trading.

Not only did the issue fall from the $283 level and breach Monday’s close ($255.64), it also breached Monday's low ($248.41), falling to $247.07.

That turned out to be be a “buy the dip” opportunity, as the issue has rallied to $277 and was not far off that high at the time of publication, trading 7.4% higher at $274.56. 

The full discussion on the issue from today’s show can be heard below: 

Courtesy photo.