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Why Wayfair Stock Rose 12% in August

By Demitri Kalogeropoulos - Sep 3, 2020 at 8:47AM

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Growth hit a new level in the second quarter.

What happened

Wayfair (W 6.36%) shares outpaced a booming market in August by rising 12% compared to the S&P 500's 7% increase, according to data provided by S&P Global Market Intelligence.

That boost added to a huge rally for the e-commerce specialist, which is up over 200% so far in 2020.

So what

Investors had plenty of good news to celebrate last month as Wayfair blew past expectations to announce an 84% second-quarter sales increase. Surging interest in home upgrades, and e-commerce spending, seemed to create the ideal selling environment for the company. Wayfair also achieved profitability with dramatic flair, with adjusted earnings landing at 10% of sales compared to a 3% loss a year earlier.

A young woman shops online from her couch.

Image source: Getty Images.

Now what

CEO Niraj Shah and his team had been aiming to reach profitability in 2020 even before the pandemic supercharged Wayfair's growth rate. That possibility looks easily achievable now, despite the expected slowdown in the second half of 2020.

Looking further out, the key question for investors is whether Wayfair can hold on to most of the new customers it welcomed during maximum social distancing efforts, or if instead these shoppers will go back to multi-channel selling rivals like Home Depot.

Demitri Kalogeropoulos owns shares of Home Depot. The Motley Fool owns shares of and recommends Home Depot and Wayfair and recommends the following options: long January 2021 $120 calls on Home Depot and short January 2021 $210 calls on Home Depot. The Motley Fool has a disclosure policy.

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