What happened

Wayfair (W 4.43%) was trading down 19.5% as of 12:21 p.m. ET on Thursday after reporting first-quarter earnings results.

Wayfair has struggled to maintain revenue growth following the rush of online orders during 2020. Revenue fell 13.9% year over year, following a 4% decline in revenue in 2021. Wayfair missed on earnings estimates, with adjusted loss per share coming in at $1.96, a wider loss than the $1.54 analysts expected.

So what

One trend that needs to reverse is the decline in active customers. The active customer count stood at 25.4 million, down 23% year over year. On the bright side, spending per active customer continued to show strength, up 12.8% over the year-ago quarter.  

Despite the worsening trend in revenue and active customer retention, CEO Niraj Shah still likes the company's long-term competitive position to win in the online home goods market.

"We are well positioned to outperform and gain share from here, particularly as supply chain constraints ease, and we are not losing sight of the massive market opportunity still ahead," Shah said in a statement. 

The long-term e-commerce opportunity in home goods is vastly larger than Wayfair's $14 billion in trailing-12-month revenue. The market is estimated to be worth over $800 billion and expected to grow to $1.2 trillion by 2030. 

A large, well decorated living room.

Image source: Getty Images.

Now what

Wayfair may need to show better stability in revenue and active customers to move the stock higher. However, at some point, investors may wake up to how cheap the stock is right now.

W PS Ratio Chart

W PS Ratio data by YCharts

The stock is trading at its cheapest valuation since going public. At a price-to-sales (P/S) ratio of 0.57, Wayfair's valuation is now cheaper than Walmart's. If you believe Wayfair will return to growth, which is still a good bet given how much Wayfair has grown over the last 10 years, this could be a great buying opportunity.