Wayfair's shares were up 4 percent on Wednesday after an analyst with Wedbush Securities said the Boston-based home goods ecommerce company is an attractive acquisition target.
Seth Basham of Wedbush made the comments in wake of PetSmart's $3.35 billion of Chewy.com, as well as Wal-Mart's aggressive acquisition spree on the ecommerce front, StreetInsider.com reported. He said large retailers like Wal-Mart and PetSmart are scooping up ecommerce companies because they realize it's hard to compete with them head-on.
Basham said Wayfair's potential acquirers include Amazon, Target, Wal-Mart, Bed Bath & Beyond, Home Depot and Lowe's.
What separates Wayfair from the ecommerce companies that are getting acquired by PetSmart and Wal-Mart is that the Boston company is public and it brings in substantially more revenue. The company finished the 2016 fiscal year with $3.4 billion in total net revenue, a 50 percent increase from the previous year. Out of Wal-Mart's ecommerce acquisitions and Chewy.com, the only companies that would come close to Wayfair is Chewy.com ($900 million in 2016).
Given that Wayfair's market cap is at $4 billion right now, the company would likely cost a lot more money to acquire than Chewy.com, whose $3.35 billion price tag made it the largest ecommerce deal in history. In other words, an acquisition of Wayfair would likely be another historic deal itself.
Wayfair has not made any indications that it would consider getting acquired after going public in 2014. The company did not respond to a request for comment about the Wedbush analyst's statement.
While Wayfair has continued to see double-digit revenue growth every quarter, that quarterly growth has begun to slow. The company's total net revenue growth in 2016's fourth quarter was 33.1 percent, compared to 81 percent in Q4 2015.
The company's net loss, in the meantime, has continued to grow — something that has tested the patience of some investors. Its net loss in Q4 2016 was $44 million, nearly triple the $15.5 net loss it had in the same quarter from the previous year.
As we have pointed out before in the BostInno Beat newsletter, Wayfair's problems are ones that Amazon has experienced from time to time, namely that it burns through lots of cash to expand market share. The question for Wayfair is whether it can find sustainable long-term growth as a standalone company that continues to invest heavily in infrastructure and technology.
