Wayfair Sinks on Short-Seller Report

Wayfair sinks after Citron highlights academic paper with $10.24 valuation

Wayfair sinks after Citron highlights academic paper with $10.24 valuation. See Stockwinners.com for details

Shares of Wayfair (W) are lower after short seller Citron Research highlighted on Twitter an academic paper on the company’s valuation.

The paper states, “We begin by applying the proposed customer-based valuation methodology to data from Overstock (OSTK), an e-commerce retailer selling a wide assortment of products.

We validate the model’s fit, compare the results to alternative methodologies, estimate Overstock’s valuation, then obtain a valuation distribution which accounts for uncertainty in the fitted model parameters. We then apply the methodology to data from Wayfair, a large and fast-growing internet-based home goods seller.”

The paper’s authors, Daniel McCarthy and Peter Fader, estimate that Overstock earned approximately $9 per acquired customer, while Wayfair incurred a loss of approximately $10 per customer in Q1 of 2017.

They write, “While we anticipate that the unit economics of Wayfair’s newly acquired customers will improve in the future as their variable contribution margin is expected to expand, challenging unit economics are a reality for the business, and are an important driver behind their relatively modest valuation.”

They estimate a valuation for Overstock of $16.88 per share and a fair valuation for Wayfair of $10.24 per share.

For Wayfair, the writers explain, “We project revenues over the next 50 years to drive our model for Wayfair’s overall valuation. We assume the long-term growth rate of the labor forces in Canada, the UK, and Germany are equal to their historical averages of 1.2%, 0.9%, and 0.4%, respectively.”

On Twitter, Citron wrote, “Smartest piece EVER written on $W. Not by a short or long. By a team of Ivy League scientists who specialize in predictive models. $10 tgt…Cannot argue with this analysis- target $10 Smarter work than ANYONE on Wall Street has ever done on Wayfair.”

The firm has disclosed publicly in the past a short position in Wayfair.

The online retailer in Friday’s trading is down 7%, or $6.04, to $75.71.


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GrubHub dips after Amazon teams up with competitor

GrubHub dips after Amazon teams up with competitor

 GrubHub dips after Amazon teams up with competitor. See Stockwinners.com

Shares of GrubHub (GRUB) are sliding after Olo, which offers an online food ordering solution for the restaurant industry, announced earlier this morning that it is teaming up with Amazon (AMZN).

WHAT’S NEW

Earlier, Olo said its new partnership with Amazon will enable thousands of Olo restaurant customers to “gain easy integration” with Amazon Restaurants.

“We are excited to leverage Olo’s digital ordering technology and continue rapidly growing our network of restaurants to give Amazon Prime members more options for fast delivery from their favorite brands. This integration will enable Amazon Restaurants to onboard new restaurants with ease, as well as quickly add more new choices and delivery options for customers,” said Gus Lopez, general manager of Amazon Restaurants.

Olo restaurants can offer guests counter and curbside pickup for orders placed by phone, web, mobile web, app, Amazon’s Alexa-enabled devices and more, as well as delivery through Olo Dispatch and Olo Rails, the companies noted.

PRICE ACTION

GrubHub shares are down 2% to $52.40


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This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.