Wayfair W shares have plunged 45.5% in the trailing 12 months, underperforming the Zacks Retail-Wholesale sector’s appreciation of 13.7% and the Zacks Internet - Commerce industry’s return of 22.4%. 

The company’s underperformance can be attributed to a combination of factors impacting its profitability and growth. Macroeconomic headwinds, including fluctuations in consumer spending and inflationary pressures, have strained the company’s financial performance. Additionally, as Wayfair expands internationally, it faces heightened currency risks, with exchange rate volatility negatively impacting its revenues from foreign markets. 

Wayfair also faces intense competition from all segments of the home goods market, which remains a long-term challenge. Competitors like Amazon AMZN, Walmart WMT and Home Depot HD put pressure on Wayfair’s market share. Amazon offers a vast selection of home furniture and décor at competitive prices, while Walmart leverages its extensive supply chain and physical stores for omnichannel shopping. Home Depot, the world’s largest home improvement specialty retailer, has an interconnected retail strategy that remains a key growth driver for the business. Shares of Amazon and Walmart have gained 11.5% and 41.6%, respectively, in the trailing 12 months, while Home Depot has lost 5.6%.

Despite these challenges, Wayfair keeps identifying new growth opportunities to strengthen its long-term prospects. The company recently launched Wayfair Verified, a program designed to give customers a shortcut to the best items in the Wayfair catalog across every style and price point. This move provides shoppers with greater transparency by ensuring that verified products meet strict quality and durability standards, helping customers make more informed purchasing decisions. This could lead to higher conversion rates and stronger customer loyalty, ultimately driving revenue growth. 

The Zacks Consensus Estimate for Wayfair’s first-quarter 2025 loss per share is currently pegged at 14 cents, which has narrowed by 3 cents over the past 30 days. The estimate indicates year-over-year growth of 56.25%. 

The consensus mark for revenues is pegged at $2.71 billion, indicating a year-over-year decline of 0.77%.

Wayfair beat the Zacks Consensus Estimate for earnings in two of the trailing four quarters and missed twice, with the negative average surprise being 320.11%.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Wayfair Stock: Buy, Sell or Hold?

Wayfair continues to expand its market presence through its diverse brand portfolio, advanced technology integration and growing international footprint. The company leverages AI-driven tools and advertising strategies to enhance customer engagement and sales. As a leader in the online home goods market, Wayfair benefits from increasing digital adoption and housing sector growth. However, intense competition from Amazon and other retailers pressures its pricing and margins, while high advertising costs impact profitability. Additionally, currency fluctuations pose risks to its international expansion. Wayfair's business is also subject to seasonality and external factors like weather-related disruptions, which create unpredictability in its sales performance.

Wayfair currently carries a Zacks Rank #3 (Hold), suggesting that it may be wise for investors to wait for a more favorable entry point in 2025. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Amazon.com, Inc. (AMZN) : Free Stock Analysis Report

Walmart Inc. (WMT) : Free Stock Analysis Report

The Home Depot, Inc. (HD) : Free Stock Analysis Report

Wayfair Inc. (W) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research