Image source: Wayfair.   

One of last year's hottest stocks is off to the races again in 2016. Shares of Wayfair (NYSE:W) -- the online furniture retailer whose stock soared 140% last year -- climbed 17% higher last week. 

An analyst upgrade helped propel the stock higher, but in this volatile market, it's worth pointing out that the 17% pop last week wasn't enough to win back what Wayfair stock had surrendered through the first two trading weeks of 2016. The stock is still trading 7% lower year to date, in line with the S&P 500. 

Citigroup analyst Mark May boosted his rating on the dot-com darling last week. May's rating is going from "neutral" to "buy" with a $51 price target.

He feels that Wayfair posted positive EBITDA and free cash flow during the recently concluded holiday quarter, a big milestone for a company that's been bleeding money for years. Wall Street sees the bottom-line deficits continuing until 2017.

Investors accept the red ink. Wayfair is investing in growth, and for a web-tethered retailer that typically means forgoing near-term profits for long-term results.

Mr. Market didn't see it that way at first. The stock went public at $29 in late 2014, flopping to close in the teens by the end of the year. It bounced back in 2015 on the heels of posting narrowing losses than analysts were expecting and bumping its guidance higher each and every quarter.

Furniture is one category that seemed as if it would never work in cyberspace. The items are too heavy to ship cheaply, and folks like to see pieces in person to make sure they work with their decor. Wayfair has managed to speed up the fulfillment game, and the value proposition of its free shipping and widening catalog have won over skeptical furniture shoppers. Wayfair expected to top $3 billion in sales this year, five times as much as it rang up just four years earlier. 

Wayfair has a tantalizing audience. A whopping 70% of its orders come from women, and the typical Wayfair shopper is a woman 35 to 65 years old with annual household income of $60,000 to $175,000.

We'll find out soon enough if Citi's analyst is on point with his call for a breakout holiday quarter. Wayfair reports quarterly results on the morning of Feb. 25. That's a month from today, and the stock will likely continue to be volatile between now and then. As long as growth keeps clocking in ahead of market expectations and deficits contract, the market will continue to warm up to Wayfair. It has already proven that it can make a difficult model work online. Now all it needs to do is prove that it can do exactly that in a profitable manner.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.