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Why Wayfair Stock Lost 10% in July

By Demitri Kalogeropoulos – Aug 8, 2019 at 2:41PM

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Accelerating losses have investors worried about this high-growth stock.

What happened

Wayfair (W 4.79%) investors trailed the market last month as the stock shed 10% to a 1% uptick in the S&P 500, according to S&P Global Market Intelligence. The decline still left investors with positive returns, with the e-commerce giant up 35% so far in 2019.

An online shopper enters his credit card information on a laptop.

Image source: Getty Images.

So what

July's decline came as investors braced for potentially bad news from the home furnishings seller in its second-quarter report scheduled for the first day of August. That report included hopeful signs for the business, including booming sales growth, rising engagement levels, and modest advertising spending. On the other hand, Wayfair's costs spiked, driving net losses higher.  

Now what

Investors were more concerned with the cautious outlook that CEO Niraj Shah and his team issued. The company is predicting even more red ink for the fiscal third-quarter as it ramps up hiring in advance of the holiday shopping season. Sales gains are forecast to slow, as well.

That modest revenue outlook shouldn't be a surprise, since Wayfair has outperformed its short-term prediction in each of the last five quarters. The net losses are more concrete, though, as executives have made it clear that they intend to spend aggressively to build a defensible global selling position before beginning to march the business toward the break-even point.

Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Wayfair. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Wayfair Inc. Stock Quote
Wayfair Inc.
W
$34.11 (4.79%) $1.56

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