It Doesn’t Matter Until It Matters

With new market realities, Wayfair should quickly trade down to $70.

Anyone who follows Citron knows that we have been bearish on Wayfair for YEARS as we never thought selling furniture online with free shipping would be a profitable business.  We were right and wrong at the same time.

Right – Wayfair has never been able to make the business profitable for 8 years as Wayfair has generated losses vs. Wall Street expectations of profitability.

Wrong – The stock price continued to go higher as Wall Street has ignored a lack of profitability over the years and instead stayed focused on top-line growth.

Below is an infographic of management’s elusive promise of profits over the years.

IT FINALLY MATTERS

In an environment best represented by Wayfair’s unjustifiable stock price, bankers rushed to market a bevy of high growth unprofitable companies, most with more compelling business models than Wayfair.

With Wayfair’s enterprise value at close to $11 billion ask yourself how it would look as an IPO today with:

  • $1 billion of historic losses
  • Upper management turnover (recent departure of COO and CTO)
  • Decelerating growth
  • Sizable insider sales in last financing round
  • Failed international expansion
  • Dependence on products “made in china”

It is the opinion of Citron that as of TODAY this IPO would have to get pulled.  To illustrate how crazy this is, since the LYFT IPO (start of the recent bubble) insiders of Wayfair have sold over $180 million of stock.

In this new reality, we expect Wayfair to trade back to its 5-year average stock price of $68-$69 FAST.

Cautious Investing to All

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