Wayfair: The technical analysis and fundamentals are in disagreement
Internet retailer Wayfair (NYSE: W) seems to be defying the odds in my opinion. The stock has performed incredibly well over the last few months, but the fundamentals of the company are really weak compared to other companies.
Looking at the daily chart, we see that Wayfair more than doubled from its December low to the recent high. The rally got a big boost from the earnings report on February 22 and we see that on the chart with the big gap higher. The stock has pulled back in recent weeks, but it looks like it is hitting support in the $150 area.
The daily stochastics moved from overbought to oversold during the recent pullback and they performed a bullish crossover on April 2.
The AI Trend Prediction tool generated a bullish signal for Wayfair on April 1. The predicted move calls for a gain of at least 2% over the next week and it came with a confidence level of 74%. Previous predictions on Wayfair have been successful 85% of the time.
I wrote a bearish article about the stock back on December 5 and another one on January 15. The article in December turned out to be a great call as the stock fell from the $110 area all the way down to $80. The article in January was completely wrong as the stock rallied right through resistance.
I mentioned earlier that Wayfair’s fundamentals were weak. The company scores a 2 on Investor’s Business Daily’s EPS rating system and that means that 98% of companies in their database have seen better earnings growth in recent years and the most recent quarter. The company gets a D in IBD’s SMR rating system and that is the second lowest grade possible.
The company has continued to lose money and therefore it doesn’t have a return on equity and the profit margin is a -5.4%. The only thing that keeps the SMR rating from being an E is the sales growth. The company has seen sales grow at a rate of 42% per year over the last three years and they grew by 40% in the most recent quarter.
The short-term chart looks good for Wayfair, but I would have trouble making a long-term investment in Wayfair with the current earnings picture.
W's RSI Indicator is staying in oversold zone for 2 days
It is expected that a price bounce should occur soon.
Technical Analysis (Indicators)
Bullish Trend Analysis
The Stochastic Oscillator shows that the ticker has stayed in the oversold zone for 6 days. The price of this ticker is presumed to bounce back soon, since the longer the ticker stays in the oversold zone, the more promptly an upward trend is expected.
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where W advanced for three days, in of 291 cases, the price rose further within the following month. The odds of a continued upward trend are .
W may jump back above the lower band and head toward the middle band. Traders may consider buying the stock or exploring call options.
Bearish Trend Analysis
The Momentum Indicator moved below the 0 level on October 18, 2024. You may want to consider selling the stock, shorting the stock, or exploring put options on W as a result. In of 82 cases where the Momentum Indicator fell below 0, the stock fell further within the subsequent month. The odds of a continued downward trend are .
The Moving Average Convergence Divergence Histogram (MACD) for W turned negative on October 10, 2024. This could be a sign that the stock is set to turn lower in the coming weeks. Traders may want to sell the stock or buy put options. Tickeron's A.I.dvisor looked at 43 similar instances when the indicator turned negative. In of the 43 cases the stock turned lower in the days that followed. This puts the odds of success at .
W moved below its 50-day moving average on October 21, 2024 date and that indicates a change from an upward trend to a downward trend.
The 10-day moving average for W crossed bearishly below the 50-day moving average on October 28, 2024. This indicates that the trend has shifted lower and could be considered a sell signal. In of 19 past instances when the 10-day crossed below the 50-day, the stock continued to move higher over the following month. The odds of a continued downward trend are .
Following a 3-day decline, the stock is projected to fall further. Considering past instances where W declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .
The Aroon Indicator for W entered a downward trend on October 28, 2024. This could indicate a strong downward move is ahead for the stock. Traders may want to consider selling the stock or buying put options.
The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating fairly steady price growth. W’s price grows at a lower rate over the last 12 months as compared to S&P 500 index constituents.
The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to worse than average earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.
The Tickeron Valuation Rating of (best 1 - 100 worst) indicates that the company is significantly overvalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (0.000) is normal, around the industry mean (4.356). P/E Ratio (0.000) is within average values for comparable stocks, (71.163). W's Projected Growth (PEG Ratio) (0.000) is slightly lower than the industry average of (1.293). Dividend Yield (0.000) settles around the average of (0.024) among similar stocks. P/S Ratio (0.562) is also within normal values, averaging (6.077).
The Tickeron SMR rating for this company is (best 1 - 100 worst), indicating weak sales and an unprofitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating that the returns do not compensate for the risks. W’s unstable profits reported over time resulted in significant Drawdowns within these last five years. A stable profit reduces stock drawdown and volatility. The average Profit vs. Risk Rating rating for the industry is 90, placing this stock worse than average.
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General Information
an online home furnishing store
Industry InternetRetail