NEW BULLISH Plays
Wayfair Inc. - W - close: 22.60 change: +0.58
Stop Loss: 21.35
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on January -- at $---.--
Listed on January 06, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 1.0 million
New Positions: Yes, see below
Why We Like It:
The S&P 500 is down five days in a row. One stock bucking that trend is W. Shares of W are up five days in a row. The rally appears to be accelerating.
Who is Wayfair? According to the company, "Wayfair Inc. offers an extensive selection of home furnishings and dÃ©cor across all styles and price points. The Wayfair family of brands includes:
Wayfair.com, an online destination for all things home
Joss & Main, an online flash sales site offering inspiring home design daily
AllModern, a go-to online source for modern design
DwellStudio, a design house for fashion-forward modern furnishings
Birch Lane, a collection of classic furnishings and timeless home dÃ©cor
Wayfair is headquartered in Boston, Massachusetts, with additional locations in New York, Ogden, Utah, Hebron, Kentucky, Galway, Ireland, London, Berlin and Sydney."
Shares of W came to market with an IPO in October last year and priced at $29.00. They opened at $36.00 and spiked up to $39.43 on the first day of trading. Since that opening day the stock has been cut in half. W traded down to $16.74 in mid December. The stock bottomed a couple of days before the S&P 500 did in the market's December decline.
There was a recent story about the surge in Class A shares of W. Sometimes mutual fund and hedge fund managers have limits on how much stock they can own in their portfolio. Their systems will not allow them to own more than a certain percentage of any one company based on the number of shares outstanding. When W initially came to market it had a very low count of Class A shares and a high number of Class B shares. The Class B shares are convertible into Class A.
According to Wayfair's CFO they asked Class B shareholders to convert some of their investment into Class A. That would boost the amount of shares outstanding. This is a bullish development since it means more fund managers want to own W and now they can with the increase in Class A shares.
The company seems to be growing at a tremendous pace. Their first earnings report as a public company was November 10th. Revenues soared +41.7% to $336.2 million. Their direct retail business surged +57%. W said their gross profit was $79.0 million versus $58.6 million a year ago.
Additional Q3 highlights included the number of active customers for their direct retail business rose +61% to $2.9 million year over year. Their LTM Net revenue per active customer increase $342 or +8.6% year over year and +3.0% from the second quarter of 2014.
The stock is also a short squeeze candidate. In a recent interview one of the co-founders said that together the two co-founders own between 40% and 50% of the stock. Meanwhile short interest is more than 56% of the very small 11.1 million share float.
If the current rally continues W could see a short squeeze.
Tonight I am suggesting a trigger to open bullish positions at $23.05.
Trigger @ $23.05
- Suggested Positions -
Buy W stock @ (trigger)
- (or for more adventurous traders, try this option) -
Buy the Feb $22.50 CALL (W150220C22.50) current ask $2.75
Option Format: symbol-year-month-day-call-strike