Why Wayfair Stock Soared Today
Key Points
Wayfair stock surges on an earnings beat.
Shares topped $100 for the first time since early 2022.
Short-sellers look to be covering their positions today.
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Online furniture retailer Wayfair (NYSE: W) reported a solid quarter today, and shares soared. The stock hit more than a three-year high and surpassed $100 per share for the first time since early 2022.
Wayfair stock was trading near the morning high, up by 20.1% as of 10:40 a.m. ET.
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A short squeeze is boosting the stock
It appears a short squeeze is underway with Wayfair stock today. The stock had about 20% of its shares sold short as of mid-October, according to MarketWatch. That helps explain the sharp reaction to earnings.
Wayfair reported sales up 8.1% year over year. Revenue and adjusted earnings per share (EPS) both exceeded analyst estimates. CEO Niraj Shah called the quarter a "great success," and noted the company accelerated market share gains during the period.
The results were solid, but the market reaction looks to be driven by the short squeeze as short-sellers cover positions. Long-term investors should be happy, though, as Wayfair's business fundamentals have improved. The company generated $93 million in free cash flow versus negative free cash flow in the year-ago period.
While the high short interest resulted in an oversize stock surge, Wayfair does now seem to have its business is a good place.
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Howard Smith has no position in any of the stocks mentioned. The Motley Fool recommends Wayfair. The Motley Fool has a disclosure policy.
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