Analyst Note| Jaime M. Katz, CFA |
No-moat Wayfair posted robust first-quarter results, with active customers that reached 33 million (up 57%) and the delivery of 14.7 million orders (up 49%), with 75% coming from repeat customers. The healthy demand drove a total sales increase of 49% (a sequential improvement from fourth-quarter sales growth of 45%), modestly above the 44% increase we had forecast. More impressive is the improving adjusted EBITDA Wayfair continues to generate, printing a 5.9% margin in the period, more than 1,000 basis points better than a year ago. After incorporating results, we plan to raise our $102 fair value estimate by a high-single-digit rate but view shares as materially overvalued, trading at a triple-digit multiple of our 2022 estimated EPS. Over the near term, Wayfair will be uniquely positioned to outperform its peer group thanks to its owned logistics operations and freight forwarding business, which allow for better flow through of inventory given ocean freight and supply chain issues that have recently plagued a plethora of industries.