Understanding Wayfair’s Risk Factors

Wayfair (W) is an American online retailer of home goods, such as furniture and home décor products. It sells its products across North America and Europe.

For Q4 2021, Wayfair reported an 11.4% year-over-year drop in revenue to $3.3 billion but surpassed the consensus estimate of $3.28 billion. It posted an adjusted loss per share of $0.92, which missed the consensus estimate of a $0.65 loss per share. 

Wayfair ended the quarter with $2.4 billion in cash. The company recently partnered with Capital One (COF) to provide credit solutions to its business customers.

With this in mind, we used TipRanks to take a look at the risk factors for Wayfair.

Risk Factors

According to the new TipRanks Risk Factors tool, Wayfair’s top risk category is Finance and Corporate, with 18 of the total 49 risks identified for the stock. Production and Ability to Sell are the next two major risk categories, each with 8 risks.

Wayfair is expanding internationally and setting up physical retail locations. It tells investors that its expansion efforts will cause its operating expenses to rise over the next several years. Therefore, the company cautions that it may not be profitable in the coming years.

Despite investing in expanding its business into more countries and with new brands, Wayfair cautions that those efforts may not be successful. It warns that if it fails to recoup the investments made in the expansion efforts, its business and financial condition may be materially adversely affected.

Wayfair informs investors that it depends on third parties to operate certain aspects of its business. For example, it relies on shipping companies such as FedEx, UPS, and DHL to deliver products to customers on its behalf. The company explains that its ability to effectively deliver products to customers may be affected by factors outside its control. It goes on to caution that if products are delivered late or damaged during the delivery process, customers could become dissatisfied and stop buying from Wayfair.

Finally, Wayfair tells investors that the COVID-19 pandemic may continue to disrupt the supply chain and adversely affect its business in 2022. Wayfair further explains that pandemic-related challenges could exacerbate its other risks.

Analysts’ Take

RBC Capital analyst Steven Shemesh recently reiterated a Hold rating on Wayfair stock but lowered the price target to $137 from $158. Shemesh’s reduced price target still suggests 8.53% upside potential.

Consensus among analysts is a Hold based on 8 Buys, 11 Holds, and 3 Sells. The average Wayfair price target of $161.50 implies 27.94% upside potential to current levels.

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