During Thursday's "Mad Money" program host Jim Cramer told viewers about how the bulls and the bears are fighting it out over the stock of Wayfair (W) , the online home merchandise retailer that received a buy rating from Needham with a $280 price target while at the same time receiving a sell rating from Bank of America with a $175 price target.
Analyst face-offs like this are great for investors, Cramer noted, because you get to hear both sides of the argument. In the case of Wayfair, Needham notes that while there may be short-term weakness, the company's CastleGate fulfillment service is its hidden gem. Meanwhile, Bank of America cites that Wayfair is up against tough comparisons and it doesn't think the company can deliver as people begin to travel more and spend less on their homes.
Shares of Wayfair are off 16% for the year, but Needham believes the stock is worth 1.6 times sales. Bank of America believes 1.2 times sales is a more realistic valuation. According to Cramer, they're both wrong.
The Fed is no longer our friend, Cramer reminded viewers, and that means the market isn't going to pay up for a stock such as Wayfair. Wayfair trades for 32x 2023 earnings estimates and that's simply way too high.
Let's check out the charts and technical indicators to round out the discussion.
In this daily bar chart of W, below, we can see a downtrend in force since March. Wayfair is trading below both the declining 50-day moving average line and the declining 200-day line. The On-Balance-Volume (OBV) line is showing weakness from August. The Moving Average Convergence Divergence (MACD) oscillator is currently bearish and it has spent much of the past year below the zero line.
In this weekly Japanese candlestick chart of W, below, we can see a bearish picture. Prices are in a decline below the negatively sloped 40-week moving average line. Reading the chart from right to left (that is the correct way) we find no nearby potential support zone. The OBV line shows weakness from August like the daily line does. The MACD oscillator is bearish in this time frame, too.
In this daily Point and Figure chart of W, below, we can see a potential downside price target in the $146 area.
In this weekly Point and Figure chart of W, below, a longer-term target of $74 is displayed.
Bottom line strategy: The charts and indicators of W are bearish with a capital B. Avoid the long side.
