After Triple-Digit Profits, It's Time to Short Wayfair Again

As my readers would know, I have been bearish on Wayfair (W) for almost a year now. I have recommended shorting the stock several times over the last 12 months. However, I recently recommended investors to buy the stock after the post-earnings crash.

Wayfair’s latest quarterly reports were very weak, and as a result, the stock plunged almost 10% after it released its Q2 earnings. Despite the fact that I am bearish on the company, I recommended investors to buy the stock on the pullback for short-term gains. Due to the fact that Wayfair is still a fast growing company and that the market is obsessed with year-over-year growth, I expected Wayfair to jump back over $40.

To profit from this, I recommended my readers to either buy the stock or buy call options.
Since then, Wayfair has shot up almost 15% whereas the call options have yielded triple-digit returns (Wayfair’s price at the time of writing is $42.10). Given the high returns, I think investors should consider booking complete profit or even shorting Wayfair as the company’s long-term prospects are still very bleak.

Despite the fact that Wayfair is reporting strong growth, the company is still not on track to turn profitable any time soon.
After Triple-Digit Profits, It
Image by ErikaWittlieb / Pixabay
And the problem with non-profitable, high-growth companies is that whenever growth slows down, the stock tends to crash considerably. In many ways, Wayfair is comparable to SolarCity and Yelp at their peaks.

These stocks tend to be pretty volatile, so traders can benefit from it if they time their calls correctly. However, in the long-term, they are likely to crash, which is why I think Wayfair is a great short at current levels. With Wayfair reporting losses every quarter, I wouldn’t be surprised to see the stock fall to sub $30 levels in the coming months.


Traders who bought Wayfair or call options when I recommended have witnessed great returns in just a few weeks. However, I think the upside at these levels is pretty limited and investors should consider booking complete profits. As for long-term investors, I still think Wayfair is a great short candidate and investors can consider taking up a short position or buying put options. I expect to see Wayfair trading under $30 in a few quarters, which is why I think the stock makes for a great short candidate at these levels.

Disclosure: No position
Published on Sep 20, 2016
By Ayush Singh

Copyrighted 2016. Content published with author's permission.

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