Wayfair (W) shares were up more than 5% on Thursday after the company reported impressive first-quarter results. Total revenue increased 49.2% year-over-year to $3.5 billion, with US sales increasing 42.8% to $2.8 billion. The company posted net income of $18.2 million, a significant improvement from a net loss of 285,865 in 1Q 2020.
The number of active customers on the Wayfair platform increased 57.3% to 33.2 million. Similarly, LTM net revenue per active customer increased 2.7% to $461. The company delivered 10.9 million orders in the quarter, up 58.9% year-over-year. The average order value increased by $2 to $237 from a year ago.
According to Chief Executive Officer Niraj Shah, the focus is on connecting all of the industry’s customers and suppliers on a unique platform.
“Our platform model creates a flywheel where scale begets growth, which leads to further efficiency. We see this in action each quarter, and Q1 was no exception,” Shah said.
The executive expects customers to remain focused on their homes going forward, allowing the company to generate more sales. Revenue growth should lead to strong profitability growth for the remainder of the year. (See Wayfair stock analysis on TipRanks)
Impressed by the 1Q financial results, equity research analyst Zachary Fadem reiterated a Buy rating. According to the analyst, the first quarter report represents an important turning point for Wayfair shares.
“While we believe W’s business (Equal Weight-rated) has undoubtedly benefited from COVID-19 (nesting, work/school from home, the shift online, housing demand, etc.), shares are entering a digestion/transition period as investors grapple with sharp valuation expansion, very difficult comparisons and increasingly low visibility into 2021 sales/margin trends,” Fadem wrote in a research note to investors.
The analyst has a $320 price target on the stock, implying 11.84% upside potential to current levels.
Consensus among analysts on Wall Street is a Moderate Buy based on 11 Buy, 7 Hold, and 1 Sell ratings. The average analyst price target of $347.72 implies 21.53% upside potential to current levels.
Wayfair scores a 7 out of 10 on the TipRanks’ Smart Score rating tool, indicating that it is likely to perform in line with market averages.
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