Wayfair stock price has crashed hard in 2022 as the company faces numerous challenges. The W stock is trading at $44, which is its lowest level since April 2020. It has crashed by more than 87% from its all-time high. Its market cap has slumped to about $5 billion, which is lower than its all-time high of $35 billion.
Wayfair is fighting multiple battles
Wayfair is a leading e-commerce company that focuses on the furniture and home decor space. The company has a strong brand and thousands of shoppers mostly from the United States.
Wayfair, like many other companies in the industry, had a relatively strong performance during the Covid-19 pandemic. As many people worked from home, they boosted their spending on home improvement products.
As a result, the company’s total revenue jumped from $6.7 billion in 2019 to more than $14 billion in 2020 as demand rose. This revenue slowed slightly in 2021 as demand moderated. Wayfair also managed to turn its first ever annual profit in 2021.
Recently, however, Wayfair is fighting several battles at once. First, demand for home products has moderated substantially as the economy reopens. Second, the soaring inflation has led to a slow demand since more people are now focusing on staples. In a statement, the company’s CEO said:
“With rising prices across the retail universe and amidst troubling geopolitical events, our mass customers in the US and internationally appear understandably more focused on where they are spending their next dollar, pound or euro.”
Third, Wayfair, like other companies, is seeing high wage inflation. This means that the company is having to pay higher salaries in a period when there is no enough demand. Finally, Wayfair is spending more money acquiring and shipping inventories. This will make it hard to become profitable.
Is Wayfair a good buy?
The Wayfair stock price has crashed hard from its all-time high. But it is not the only one that has crashed. For example, most lockdown stocks like Asana, Zoom Video, Affirm, LiveOne and Spotify have all plummeted.
Similarly, other e-commerce stocks like Carvana, Hims & Hers, Stitch Fix, and Boxed have all declind by more than 60% from their all-time highs.
At this point, it is hard to recommend investing in Wayfair since conditions are not friendly. Interest rates are rising, it is still unprofitable, and the cost of doing business is soaring. As such, the company will continue struggling.
However, there are some potential catalysts that will push the stock higher. First, Wayfair is still a market leader in the industry with over 25 million customers. As such, it will likely continue growing but at a moderated pace.
Second, companies always go through different cycles. For example, during the global financial crisis, stocks went through a downward cycle and then bounced back. The same will happen this time. Still, it is not easy to predict when the cycle will end. Finally, Wayfair is a strong brand that is significantly undervalued.
Wayfair stock price forecast
Turning to the weekly chart, we see that the Wayfair share price has been in a strong downward trend in the past few months. Along the way, the stock has moved below all moving averages. Notably, it is still above the important support at $21.94, which was the lowest level on March 2020.
Therefore, while I expect the Wayfair share price to rebound in the coming months, the current view is bearish. The next key support level to watch will be at $21.94, which is about 51% below the current level.