Wayfair Stock Has Bounced After a Big Selloff. Is It Still a Buy?

Key Takeaways

• Positive second-quarter earnings and outlook sent Wayfair’s shares up 30% after it outperformed estimates.
• Cost-cutting and advertising strategies drove the company’s strong earnings, a Morningstar analyst says.
• Wayfair hasn’t proved itself as profitable as other companies in the home furnishing space, and competition is stiff, according to our analyst.

After Wayfair W stock struggled through the year’s first half, shares rebounded as the furniture company showed signs of a turnaround. But the latest gains may not be sustainable.

In August, Wayfair shares surged 30% after the company released its second-quarter earnings on Aug. 4, making for the stock’s best day since April 2020. “[Wayfair] shares popped quite a bit because, though housing demand has been pretty flat, the company was able to grow the top line at a high single-digit rate,” explains Morningstar senior equity analyst Jaime Katz. “They’ve continued to have some momentum, while the housing market hasn’t really seen the same momentum.”

Still, for 2026 so far, Wayfair is down 5.9%. The stock has underperformed the broader market’s 12.7% rise, as measured by the Morningstar US Total Market Index, and Katz says it still looks pricey. “The home furnishing market is very fragmented and competitive,” she says. “There’s really no reason for customers to remain sticky with any particular brand, unless you have something like a custom design component … which Wayfair does not.”

What Drove Wayfair’s Recent Gains?

Wayfair saw its strongest quarter since the covid-19 pandemic partly thanks to advertising revenues and cost-cutting. The firm generated $242 million of EBITDA for a 6.9% margin on net revenue, driving five consecutive quarters of mid-single-digit growth and its best margin since 2021. “Those are revenues that can help the business grow faster than just the housing or home furnishing markets,” Katz says.

While Wayfair had an impressive second quarter, Katz says the main driver of the stock’s move was management’s upbeat commentary, rather than a perceivable change in the company’s position in the home furnishing market. Competitors could still price it out. Wayfair “often trades more on momentum than fundamentals,” says Katz. Investors latched onto commentary around 20% top-line growth and “extrapolated that into a lengthier trend that may not be feasible.”

Katz says Wayfair isn’t quite demonstrating the level of profitability and growth that some competitors have already achieved. Companies such as Williams Sonoma WSM and Restoration Hardware RH have grown “consistently” and boast mid-teen operating margins, versus the low single digits at Wayfair.

“The cash flow generation from other businesses in the home furnishing space is a little bit more reliable and consistent,” Katz says. “Wayfair is just starting to get to that point where the top line and profit generation on each sale is less lumpy and more consistent as well, but it does take time to gather.”

Does Wayfair Stock Still Have Room to Run?

“Wayfair is overvalued right now,” Katz says, adding that the stock’s price has been highly volatile. Wayfair traded as low as $25 per share in April 2025 after reaching a high of $350 in March 2021.

Katz says Wayfair’s recent cost-cutting won’t last forever: “Costs are naturally going to grow alongside inflation … So I think we are just a little bit more restrained on the amount of further cost reductions we’re going to see." Recurring costs already cut “aren’t necessarily perpetual.”