Why Wayfair Stock May Be a Hidden Gem for Value Investors

Key Points

• Wayfair stock continues to face pressure as recession fears add to investor concerns.
• Recent layoff news and a private offering are also weighing on sentiment.
• The company is in a better fundamental position than in 2019, which many analysts believe is not reflected in its stock price.

Stocks are falling over concerns that the United States may be heading for a recession. That wouldn’t surprise Wayfair Inc. NYSE: W shareholders.

The stock is down 43% in the last 12 months and over 20% in 2025. W stock has been a target of short sellers. One reason for that is short interest in the stock, which is down slightly in the last month but still sits at over 18%.

However, as of mid-day trading on March 10, W stock is trading near its 52-week low, and the Relative Strength Indicator (RSI) suggests that the stock is oversold. For investors who are willing to endure a little more short-term pain for the potential of a longer-term gain, Wayfair may be a solid choice.

The Housing Market Remains a Significant Challenge

Wayfair was one of the biggest winners among retail stocks in 2020 and 2021, as the relocation boom spurred demand for home furnishings. This prompted the retailer to make significant investments in its logistics network. Those investments have bit back over the last couple of years as consumer spending shifted from merchandise to experiences, and now May is showing signs of outright contraction.

But the long-term outlook for the housing market remains bright. First, the core issue appears to be supply more than demand. That said, pointing out the problem and fixing it are two different things. Homebuilders are eager to build but will still need interest rates and inflation to cooperate, particularly since these builders are targeting a demographic that’s been the most sensitive to rising retail prices and a more restrictive lending environment.

Investors Are Selling the Latest News

On March 7, Wayfair announced that it was laying off 340 employees from its technology team and is planning to close its Technology Development Center in Austin, Texas. The reason, however, is that the company completed modernization and re-platforming initiatives. One of those initiatives was the launch of Muse in February 2025. This generative AI tool uses AI imagery to inspire consumers and allows them to shop for products that Wayfair recommends.

Some investors are also souring on W stock because of a $700 million private offering of senior secured notes. The company plans to use some of that offering to buy a portion of outstanding convertible senior notes due in 2025 and 2026. However, the company also announced that some of the proceeds would be used for “general corporate purposes.”

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Both of these announcements indicate that Wayfair is navigating a complex economy. However, investors appear to be in a wait-and-see posture.

The Company’s Business Model Could Be in a Sweet Spot

Although it operates a handful of outlet stores, Wayfair is almost exclusively an online retailer. While furniture is commonly a brick-and-mortar purchase, Statista reported that about 9% of furniture sales were done online in 2023. Through the remainder of the decade, the furniture e-commerce category is expected to grow at a compound annual growth rate of around 8.5%.

And, more than just selling online, Wayfair sells brand-name items at significantly lower prices. That’s appealing in any market but particularly true at times when consumers need their dollars to stretch further.

History Suggests Wayfair Is Undervalued

This week marks the five-year anniversary of the onset of the COVID-19 pandemic. Investors don’t need to be reminded of the impact that had on their portfolios. However, that could be instructive for looking at why W stock is offering an opportunity.

Although revenue was down 1.27% year-over-year (YoY), full-year revenue of $11.85 billion was 30% higher than its 2019 revenue.

What seems to be getting the attention of analysts is the company’s cost-cutting efforts that will allow it to generate higher profits even if revenue remains in the flattish range. 

Those gains may not be realized until the second half of the year after the impact of between $33 to $38 million in severance charges is settled.

Analysts have a consensus Moderate Buy rating on W stock. Although JPMorgan Chase & Co. NYSE: JPM lowered its price target from $62 to $50, Guggenheim and Truist Financial Corp. NYSE: TFC reiterated Buy ratings on the stock, and both raised their price targets.