Why Shares of Wayfair Surged Today

Image source: Wayfair.

What: Shares of online retailer Wayfair surged on Monday following the company's first-quarter earnings report. Results were mixed relative to analyst estimates, but extremely fast revenue growth was enough to send the stock about 12.5% higher by noon.

So what: Wayfair reported revenue of $747.3 million, up 76.1% year over year and $52.5 million higher than the average analyst estimate. Direct retail revenue was $711.8 million, up 92.7% year over year. The number of direct retail active customers rose 68.9% to 6.1 million, while net revenue per active customer over the past 12 months increased 13.3% to $392. Average order value also increased, up $22 year over year to $238.

While this revenue growth was enough to push the stock higher, Wayfair fell short in terms of profitability. Non-GAAP EPS came in at a loss of $0.36, down from a loss of $0.23 during the prior-year period and $0.03 below analyst expectations. On a GAAP basis, the company lost $41.2 million, or $0.49 per share. Gross margin declined to 24%, down from 24.2% during the first quarter of 2015, while operating expenses rose by 70% year over year.

Now what: Wayfair is still a long way from profitability, in part because advertising spending is elevated in an effort to gain more customers. It spent $97.7 million on advertising during the first quarter, or 13.3% of revenue. Wayfair continues to grow revenue at an astounding rate, and with sales coming in higher than analysts expected, investors boosted the stock on Monday.

As CEO Niraj Shah said about the company's quarter:

The article Why Shares of Wayfair Surged Today originally appeared on Fool.com.

Timothy Green has no position in any stocks mentioned. The Motley Fool recommends Wayfair. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.