Wayfair (W -1.94%) shareholders are in for a volatile trading week. The e-commerce giant is set to report its holiday season earnings results in just a few days (on Feb. 25), and Wall Street has high expectations for the annoucement. That's all thanks to booming demand in Wayfair's core home furnishings niches and for digital retailing in general.

With that investor enthusiasm as the backdrop, let's look at the metrics that will determine whether the growth stock will continue rallying deeper into 2021.

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Image source: Getty Images.

Winning market share

Wayfair entered the period with some seriously strong momentum. Sales in the third quarter, which ended in late September, surged 67% as the company added $1.5 billion to its revenue base. Wayfair's customer rolls reached 29 million in Q3, while the average customer boosted their ordering frequency.

Most investors who follow the stock are predicting another huge quarter, with sales jumping nearly 50% through late December.

That result will translate into market share wins against smaller home furnishings peers. It might also involve winning business away from national rivals like Home Depot and Overstock. Look for Wayfair to detail improving customer loyalty, with repeat orders representing nearly three-quarters of its volume in the fourth quarter.

Making money

Wayfair's stock wouldn't be on such a booming trajectory if the growth story didn't boast soaring profits. After several consecutive years of expanding losses, CEO Niraj Shah and his team started prioritizing profitability in early 2020 before the pandemic struck. The shift has been paying off.

W EBIT Margin (TTM) Chart

W EBIT Margin (TTM) data by YCharts

Advertising and selling costs are down even as growth is spiking. These trends resulted in a nearly double-digit adjusted profit margin in each of the last two quarters, which is at the top of management's long-term target of between 8% and 10% profitability. It's likely this figure will trend back down once sales growth levels off. But Wayfair should still announce substantial earnings this week compared to a loss in the year-ago period.

Looking forward

All eyes will be on Wayfair's initial outlook for 2021. The company should have positive momentum to rely on when it issues that forecast, but there are major risks ahead including the potential for a sharp slowdown compared to surging sales during the earlier phases of the pandemic. Wayfair's fulfillment network handled the increased volume without a hitch, but efficiency might dive for short periods this year due to underutilization of all that capacity.

Still, most investors are expecting to see another year of profitability and significant sales growth in 2021. One of the biggest questions is how committed all of its new customers will be to the Wayfair platform once shopping habits return to normal.

Management is doing what it can to ensure that most of these people will keep ordering home furnishings from Wayfair in 2022 and beyond. The stock's rally in the past year means that investors are betting that the business will succeed on this score and is positioned to outgrow a quickly growing industry for many more years to come.