W - Wayfair

[DooDiligence]

I am surprised this is worth 20% more than yesterday for some people after these results. I don't get this new economy stuff. I go back to my cigar buts.

 

Smoke 'em while you got 'em...

[premfan]

Overstock is bashing Wayfair.  Wayfair is growing Overstock is slowing. Einhorn is Finkle. Finkle is Einhorn.

[aalexa1225]

How does anyone prefer Wayfair to Overstock? It truly boggles the mind.

 

Profits are good guys. Losing money is bad.

 

AOA

[dwk24]

Can someone walk me through this "flip the switch" theory?

 

Wayfair does not make money now, is the theory that they can just stop their marketing expense and the revenue and everything else stays the same?

 

What examples can I study for someone "flipping the switch"?.

 

AOA

 

It's not so much flipping the switch as it is gaining scale to shrink OpEx as a % of Revenue to a point where you become profitable.  In Bezos' 2002 letter he references that he'd "trade real estate for tech (which gets cheaper and cheaper every year)."  He also talks about the the customer experience online being largely a fixed cost, so as a % of sales it shrinks fairly quickly with growth.  Wayfair's 'core' OpEx is not going to grow as quickly as Revenues.  There's more upfront OpEx and CapEx with ecomm, but there's more operating leverage too. Eventually, there's a tipping point where you gain scale on your tech, fulfillment, and ad spend.  And as long as other ecommerce companies continue to allow Wayfair to dominate this space (Overstock isn't a viable competitor), the odds of Wayfair hitting that profitable threshold are pretty good.

 

W's gross margins are already razor thin, and their fulfillment network (mostly tailored to large parcel) is already pretty substantial.  Not saying strong ecomm competitors can't catch up, but they'd have to move quick...

[gurpaul88]

Citron's referenced report:

 

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3040422

[DCG]

I have a hard time understanding how this company can be profitable at some point when eating the shipping cost of large items that must be incredibly expensive to ship.

[valueinvestor]

Anyone care to share why this is 500% more valuable than last month? I'm guessing algos so it hurts less for not nibbling when I thought it was cheap on a "replacement value" and sales multiple basis.

 

 

 

[Gregmal]

No idea other than these things do get whacked pretty hard during end of world scenarios, just not as bad as "value" stocks...

 

In must admit, I continue to be quite amused seeing names like this go ballistic. I am not ballsy enough to own any them, but its justice for all the schmucks who have now spent the greater part of a decade arrogantly lecturing and deriding people who invest in these names with sarcastic jargon about "oh this time is different" and "yea 100x sales! this will end well"...Not talking about David Ei....anybody specifically, but it pleases me seeing the arrogant finance twits continue to be proven wrong.

[WneverLOSE]

it's no algos, it's a mix of heavily shorted stock going down a lot since there was a lot of fear they might not be able to operate / demand will plummet but very fast people realized that if the country is locked in their homes they will break stuff and will grow tired of the old sofa, and not being able to buy anywhere else, Wayfair is THE place to go.

 

the shares price is just the same as they were 12 months ago, it might sound crazy if you look at it from the lows but it is just a combination of bad news pushing the stock down followed by good news that is exacerbated by the heavy over supply of shares due the short positions followed by over demand due to short covering.

[valueinvestor]

No idea other than these things do get whacked pretty hard during end of world scenarios, just not as bad as "value" stocks...

 

In must admit, I continue to be quite amused seeing names like this go ballistic. I am not ballsy enough to any them, but its justice for all the schmucks who have now spent the greater part of a decade arrogantly lecturing and deriding people who invest in these names with sarcastic jargon about "oh this time is different" and "yea 100x sales! this will end well"...Not talking about David Ei....anybody specifically, but it pleases me seeing the arrogant finical twits continue to be proven wrong.

 

I agree it does get pretty annoying when they get evangelical with cheap stocks, and repetitiously provide the same reason that "it's too cheap."

 

I really do see it from their point of view, but I'm in the business in buying profitable stocks, not "cheap" stocks.

 

Although I really do admire their conviction, because I really do think their thesis is right, but on a partial ownership doesn't make sense e.g. Resolute Forest Products.

 

it's no algos, it's a mix of heavily shorted stock going down a lot since there was a lot of fear they might not be able to operate / demand will plummet but very fast people realized that if the country is locked in their homes they will break stuff and will grow tired of the old sofa, and not being able to buy anywhere else, Wayfair is THE place to go.

 

the shares price is just the same as they were 12 months ago, it might sound crazy if you look at it from the lows but it is just a combination of bad news pushing the stock down followed by good news that is exacerbated by the heavy over supply of shares due the short positions followed by over demand due to short covering.

 

I was afraid that it was that. Anyone though it was a value at $30? Cumulative Research and Development a meaningful portion of Market Cap, Less than IPO, a tremendous service on both residential and commercial side, way better customer experience, etc.

 

Only thing that held me back is the possible shutting of capital markets to companies like Wayfair.

[mcliu]

Is this the next Amazon of furniture?

[Gregmal]

Nah, just another 5-10 bagger missed by arrogant dipshits who likely owned brick and mortar furniture shops because they traded at single digit pe multiples and an online growth retailer didn't "make sense" to them...

 

 

[jschembs]

Nah, just another 5-10 bagger missed by arrogant dipshits who likely owned brick and mortar furniture shops because they traded at single digit pe multiples and an online growth retailer didn't "make sense" to them...

 

You can go on your tirade about folks questioning valuation, but this business model continues to underwhelm.

[merkhet]

Anyone care to share why this is 500% more valuable than last month? I'm guessing algos so it hurts less for not nibbling when I thought it was cheap on a "replacement value" and sales multiple basis.

 

It was trading at a really depressed price because people were worried about its access to capital markets. It recovered after it became clear that there wouldn't be a winter in capital markets. More recently, a lot of the move has been from the idea that many of their brick & mortar competitors wouldn't make it out alive. Also, this:

 

https://trends.google.com/trends/explore?q=Wayfair&geo=US

 

For reference, the November 2019 peak was previously "100" for the Google Trend. Their traffic & revenue is off the charts good right now.

[jamesmadison]

The reason I couldn't bring myself to buy it at $30 (or any other price for that matter) is that I hate the damn site.  You go on to buy a chest of drawers and get 7,000 choices! What do I do with that?  Then I actually try and figure out what I want to buy and start reading the reviews.  There are hundreds per product and I get overwhelmed, say "screw it" and go over to Ikea, which has "curated" the choices down to a couple of dozen for me.  In hindsight, another example of the dangers of extrapolating one's personal experiences / preferences for the world at large.

 

Rant over

 

Perhaps more useful - Another reason Wayfair is killing it right now is that Amazon is prioritizing "essential" goods for delivery so that things like Furniture (non-essential) have much longer delivery times than usual.  It's insane to think I could have retired if 7 weeks ago I had backed up the truck.

[Jurgis]

Perhaps more useful - Another reason Wayfair is killing it right now is that Amazon is prioritizing "essential" goods for delivery so that things like Furniture (non-essential) have much longer delivery times than usual.  It's insane to think I could have retired if 7 weeks ago I had backed up the truck.

 

Only partially true if you buy delivered by Amazon. Which IMO most furniture is not.

[jamesmadison]

This feedback is coming from someone within Wayfair. 

[valueinvestor]

It's insane to think I could have retired if 7 weeks ago I had backed up the truck.

 

I was okay with missing the opportunity because I thought hindsight is 20/20 and the world was practically melting seven weeks ago to the point that the Chinese Government was apparently preparing a possible armed confrontation with the US.

 

However, reading that made me feel that it's not alright to miss it because I did not have to back up the truck and my truck would be still full after all of it. I was really looking for another GGP, and this could've been it. I clearly remember that this will go up at least 300-500% if the capital markets still allowed Wayfair to operate, so I'm going to remember this painful experience. Especially when I invested in Valeant near the highs on information way less concrete.

 

It goes to show that it makes no sense to time the market and buy when you see an opportunity, even with all the uncertainty. What did you have to lose? Only the capital you put up and even if you had a paper loss of 99%, you could always buy up more if you think the prospects are good.

[Jurgis]

It goes to show that it makes no sense to time the market and buy when you see an opportunity, even with all the uncertainty. What did you have to lose? Only the capital you put up and even if you had a paper loss of 99%, you could always buy up more if you think the prospects are good.

 

I am starting to understand why stocks are trading where they are trading.  ::)

 

How did that paper loss of 99% work with Valeant?

[Broeb22]

It's insane to think I could have retired if 7 weeks ago I had backed up the truck.

 

I was okay with missing the opportunity because I thought hindsight is 20/20 and the world was practically melting seven weeks ago to the point that the Chinese Government was apparently preparing a possible armed confrontation with the US.

 

However, reading that made me feel that it's not alright to miss it because I did not have to back up the truck and my truck would be still full after all of it. I was really looking for another GGP, and this could've been it. I clearly remember that this will go up at least 300-500% if the capital markets still allowed Wayfair to operate, so I'm going to remember this painful experience. Especially when I invested in Valeant near the highs on information way less concrete.

 

It goes to show that it makes no sense to time the market and buy when you see an opportunity, even with all the uncertainty. What did you have to lose? Only the capital you put up and even if you had a paper loss of 99%, you could always buy up more if you think the prospects are good.

 

WOW

[Spekulatius]

It's insane to think I could have retired if 7 weeks ago I had backed up the truck.

 

I was okay with missing the opportunity because I thought hindsight is 20/20 and the world was practically melting seven weeks ago to the point that the Chinese Government was apparently preparing a possible armed confrontation with the US.

 

However, reading that made me feel that it's not alright to miss it because I did not have to back up the truck and my truck would be still full after all of it. I was really looking for another GGP, and this could've been it. I clearly remember that this will go up at least 300-500% if the capital markets still allowed Wayfair to operate, so I'm going to remember this painful experience. Especially when I invested in Valeant near the highs on information way less concrete.

 

It goes to show that it makes no sense to time the market and buy when you see an opportunity, even with all the uncertainty. What did you have to lose? Only the capital you put up and even if you had a paper loss of 99%, you could always buy up more if you think the prospects are good.

 

WOW

 

It’s a fun ay statement they timing doesn’t matter with this “investment” when timing obviously needed to be perfect to get that multibagger return.

[BG2008]

The reason I couldn't bring myself to buy it at $30 (or any other price for that matter) is that I hate the damn site.  You go on to buy a chest of drawers and get 7,000 choices! What do I do with that?  Then I actually try and figure out what I want to buy and start reading the reviews.  There are hundreds per product and I get overwhelmed, say "screw it" and go over to Ikea, which has "curated" the choices down to a couple of dozen for me.  In hindsight, another example of the dangers of extrapolating one's personal experiences / preferences for the world at large.

 

Rant over

 

Perhaps more useful - Another reason Wayfair is killing it right now is that Amazon is prioritizing "essential" goods for delivery so that things like Furniture (non-essential) have much longer delivery times than usual.  It's insane to think I could have retired if 7 weeks ago I had backed up the truck.

 

Everytime, I did a "I can retire from this trade" I have lived to regret it

[jamesmadison]

The reason I couldn't bring myself to buy it at $30 (or any other price for that matter) is that I hate the damn site.  You go on to buy a chest of drawers and get 7,000 choices! What do I do with that?  Then I actually try and figure out what I want to buy and start reading the reviews.  There are hundreds per product and I get overwhelmed, say "screw it" and go over to Ikea, which has "curated" the choices down to a couple of dozen for me.  In hindsight, another example of the dangers of extrapolating one's personal experiences / preferences for the world at large.

 

Rant over

 

Perhaps more useful - Another reason Wayfair is killing it right now is that Amazon is prioritizing "essential" goods for delivery so that things like Furniture (non-essential) have much longer delivery times than usual.  It's insane to think I could have retired if 7 weeks ago I had backed up the truck.

 

Everytime, I did a "I can retire from this trade" I have lived to regret it

 

So what you're saying is that you regret regretting?  ;)

[Jurgis]

The reason I couldn't bring myself to buy it at $30 (or any other price for that matter) is that I hate the damn site.  You go on to buy a chest of drawers and get 7,000 choices! What do I do with that?  Then I actually try and figure out what I want to buy and start reading the reviews.  There are hundreds per product and I get overwhelmed, say "screw it" and go over to Ikea, which has "curated" the choices down to a couple of dozen for me.  In hindsight, another example of the dangers of extrapolating one's personal experiences / preferences for the world at large.

 

Rant over

 

Perhaps more useful - Another reason Wayfair is killing it right now is that Amazon is prioritizing "essential" goods for delivery so that things like Furniture (non-essential) have much longer delivery times than usual.  It's insane to think I could have retired if 7 weeks ago I had backed up the truck.

 

Everytime, I did a "I can retire from this trade" I have lived to regret it

 

Maybe plastics will work out for you.  ;)

[valueinvestor]

It goes to show that it makes no sense to time the market and buy when you see an opportunity, even with all the uncertainty. What did you have to lose? Only the capital you put up and even if you had a paper loss of 99%, you could always buy up more if you think the prospects are good.

 

I am starting to understand why stocks are trading where they are trading.  :)

 

How did that paper loss of 99% work with Valeant?

 

Don't know if that was supposed to be a swipe at me, and you do not really want to know, but I'll answer it just in case. :)

 

News Alert: It turned out to be a nightmare.

 

For context, I allocated 10% of my portfolio towards Valeant @ $250 each. I think I bought more at $125, more @ 75, and finally a lot more at $10 after Bill sold. From an investment perspective, it was terrible. However, as a lesson, I think it was invaluable. It's not like my portfolio is static, I contribute to it on a monthly basis, hence I always had money coming to invest in other ideas. In the beginning, the stock was very much a roll-up with slashing R&D, and repricing of drugs (man I feel stupid saying that) but in the end, it became a deleveraging play.

 

However, it is not as bad as you think, considering I bought into one of the biggest losers in history. This is because dollar-cost averaging and portfolio allocation saved me and the investment made a meager mid-single-digit return after three years of owning it. Since it was less than a 10% allocation of my portfolio and I did not lose BIG, it was thankfully not a meaningful portion of my performance.

 

I was stupid for owning it for sure, but some parts of me were glad to own it. At the end of the day, it taught me that if your timeframe is long, and you can buy more, it is hard to do bad unless you are doubling-down in a stock like Enron.