Early sales figures point to a strong holiday season for Wayfair (W) but this is not enough to change the minds of the company's critics.
On Wednesday, Wayfair reported that its gross sales over the five-day Black Friday weekend increased 109% from the previous year. The Boston-based company is an online retailer of household furniture and decor.
"We are continuing to see an industry-wide shift to e-commerce that is especially evident during the peak retail season," Niraj Shah, CEO and co-founder of Wayfair said in a statement. "Wayfair is benefiting from that shift and from our ongoing success in building a trusted, online destination for everything home."
Also on Wednesday, Real Money's resident technical analyst Bruce Kamich set a price target of $55 on the stock, which is currently trading around $43, after noting that the stock is trading above its 40-week moving average.
The peak in sales -- and recent stock movement -- still doesn't change fundamental concerns about the company raised by noted activist investors Whitney Tilson of Kase Capital and Andrew Left of Citron Research.
"I have never questioned Wayfair's ability to grow its revenue rapidly -- at least for now," Tilson wrote in an email to Real Money. "What I question is the company's ability to ever earn a meaningful profit."
Tilson announced he was shorting the company during the Robin Hood Investor Conference in November where he said the company was "a growth story run amok, with a potentially serious formaldehyde problem."
Left has been equally critical of Wayfair and said in August that "there is no bull case whatsoever" for the company.
"Selling product and becoming scalable are two completely different animals," Left said in an interview with Real Money.
As of late Wednesday trading, Wayfair's stock is up 13% for the day and up 115.77% for the year but it has yet to turn a profit. The company expects to turn a profit by the end of 2016, Shah said in an interview with Bloomberg in August.
Left mentioned that Wayfair-supporters are quick to mention that Amazon (AMZN) has not been profitable but he is quick to shoot those arguments down.
"Amazon is going to kill [Wayfair] on price, because Amazon has bots," Left said. "Anything that sells volume on Wayfair, Amazon will lower the price. They're going to kill [Wayfair] on price. That's why they're Amazon."
Furthermore, Left argues that Wayfair will have a hard time competing with Restoration Hardware (RH) and Williams-Sonoma (WSM). Both companies get 50% of their revenue from online sales, but they also have storefronts that allow people to test the the look and feel of the furniture before buying -- an important factor when considering the hassle of trying to return furniture, Left said.
While the holiday season may treat Wayfair and its traders well, long-term investors may want to tread cautiously.
