Why Wayfair Stock Tumbled 24% in October

Shares of Wayfair (NYSE: W) were moving lower last month as the online home-furnishings retailer was stung by rising interest rates and a weak earnings report at the beginning of November.

Wayfair has struggled since its pandemic-era boom as Americans have sharply scaled back on home-related spending due to high interest rates and the lock-in effect of low mortgage rates during the pandemic, which has brought existing home sales to their lowest point in nearly 30 years.

Against that backdrop, Wayfair fell another 24% last October, according to data from S&P Global Market Intelligence.

As you can see from the chart below, most of the stock losses came in the second half of the month. You can also see the gains in the 10-year treasury yield over the course of the month, which pressured Wayfair shares.

W data by YCharts.

Wayfair's struggles continue

Investors in home-improvement stocks like Wayfair have been patiently waiting for a recovery in the housing market, but after the Federal Reserve cut the benchmark federal funds rate by 50 basis points in September, investors expected rates to fall. Instead, the opposite happened, and higher mortgage rates, which are closely tied to treasury yields, tamped down hopes for a housing recovery.

Wayfair did earn a buy rating from Needham, which reinstated coverage on the stock with a price target of $60, as the analyst anticipates a tailwind from the housing-market recovery in 2025.

Later in the month, Piper Sandler lowered its price target on Wayfair from $67 to $63 as industry checks showed slowing demand in September and October as well as advertising pressure due to political ads. Piper Sandler maintained its overweight rating on the stock.

Image source: Getty Images.

Wayfair misses the mark on earnings

Wayfair has continued to slump in November as the stock fell 6% on its third-quarter earnings report on Nov. 1.

The company reported another round of declining revenue, which was down 2% to $2.88 billion, matching estimates, while adjusted earnings per share improved from $0.13 to $0.22, which topped estimates at $0.15. It also forecast another decline in revenue in Q4.

Finally, the stock fell again on Wednesday after Trump was elected, as treasury yields jumped on the news, which investors saw as a loss for home-improvement retailers like Wayfair.

If the housing market remains in a slump, Wayfair is likely to continue to struggle.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool recommends Wayfair. The Motley Fool has a disclosure policy.