- Wayfair (NYSE:W) is now higher in premarket trading after an early decline following the Q4 earnings report.
- During the earnings call, Wayfair management stated quarter-to-date revenue is trending at a mid 50% pace to mark an acceleration from the 45% growth in Q4. The consensus estimate for Q1 revenue growth is +43%.
- Shares of Wayfair are up 2.55% to $264.53. Wayfair was down 7% about an hour ago.
See, there's a good example. W is a FURNITURE store. Due to the pandemic and people's inability to go shopping and W being big on-line, they got a nice bump in 2020 from $9.1Bn to $14.2Bn in sales – very impressive. "Profits" on the other hand, $500M and this is the first time they've ever made a profit and guidance for this year is $250M yet the stock has gone from $150 to $300, which is $25Bn in market cap or 50 times best earnings.
| Year End 31st Dec | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | TTM | 2020E | 2021E | CAGR / Avg |
|---|---|---|---|---|---|---|---|---|---|---|
|
$m
|
1,319 | 2,250 | 3,380 | 4,721 | 6,779 | 9,127 | 13,008 | 14,219 | 16,009 | 47.2% |
|
$m
|
-148 | -81.3 | -196 | -235 | -473 | -930 | -45.6 | |||
|
$m
|
-148 | -77.4 | -194 | -245 | -504 | -985 | -169 | 486 | 250 | |
|
$
|
-2.97 | -0.925 | -2.29 | -1.99 | -5.63 | -10.7 | -2.73 | |||
|
$
|
-2.97 | -0.925 | -2.29 | -1.91 | -5.64 | -10.7 | -2.70 | 4.44 | 2.40 | |
|
%
|
-46.0 | |||||||||
|
x
|
58.2 | 108 | ||||||||
|
|
1.38 | |||||||||
| Profitability | ||||||||||
There is no possible way they can repeat this growth and it's very unlikely they can even sustain what they have once things get back to normal. So, for the LTP, this is a good short play – our first one.
- Sell 3 W Aug $300 calls at $45 ($13,500)
- Buy 5 W 2023 $340 puts for $134 ($67,000)
- Sell 5 W Jan ('22) $240 puts for $47.50 ($23,750)
That's net $29,750 on the $50,000 spread but we have a year advantage and we'll roll the short puts to something much lower, hopefully. We'll also have 3 more opportunities to sell short calls so, hopefully, by the next cycle, we'll be at net $15,000, etc. The margin on the short Aug calls is $26,407 so not the most efficient trade but that will decrease if W goes lower and I really can't see $300 holding.
