Why Wayfair Stock Has Gained 48% So Far in 2018

What happened

E-commerce retailer Wayfair (NYSE: W) has trounced the market by rising 48% through the first six months of 2018, compared to a 2% uptick in the S&P 500, according to data provided by S&P Global Market Intelligence.

The rally has helped the home furnishings specialist rise more than 200% since its initial public offering in 2014.

So what

Most of the increase came following surprisingly strong first-quarter results in May that showed off the power of Wayfair's business. Rather than slow down, as management had predicted, sales growth sped up compared to its record-setting holiday quarter. Revenue jumped 48%, in fact, as Wayfair's base of active customers reached 11.8 million.

The company also expanded its profit margin slightly, even though rivals like Overstock cut prices and boosted advertising spending in hopes of slowing Wayfair's market share gains.

Now what

The fact that Wayfair's growth wasn't hurt by aggressive competitive moves supports management's hopes that the business will become a major force in the global home furnishings market. It's not clear yet what level of profitability that dominant market position might eventually deliver, but the longer Wayfair can keep growing at the expense of rivals, the more earnings power it's likely to enjoy over the long term.

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Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Wayfair. The Motley Fool has a disclosure policy.