Wayfair (Neutral, $44 PO) Stock view: Timeline on profitability still an issue, but comps ease in 2Q’17 Wayfair’s two issues have been deceleration in U.S. revenue growth and negative operating margins as the company continues to aggressively invest in logistics, international expansion, marketing, and new categories. 1Q customer and order growth comps remain tough, which was one of the drivers of revenue growth guidance below expectations. Wayfair also attributed weak guidance to caution on the retail environment and added investment. Growth comps ease in 2Q/3Q, and there is potential for more stable growth in 2Q guidance to drive improving investor sentiment. As for margins, management guided to EBITDA margin of (3.5%)-(3.8%), a deceleration from (2.8%) in 1Q’16 due to a lower opex absorption in the quarter on seasonally lower sales. The US is expected to swing back to EBITDA losses in 1Q’17, while Intl losses are expected to remain steady. We forecast EBITDA margin of (2.4%), with (0.2%) EBITDA margin in the US and (19.0%) margin in International. The company continues to expect little to no ad spend leverage given increase International ad spend. Management historically builds conservativism into its guidance and, until last year, had a track record of beating the upper end of its sales outlook by ~10%. Recently, revenue has been by a low-single digit percentage. Our above consensus 1Q revenue forecast implies 1% upside to the high end of the guidance range, in line with the trend over the past 3 quarters. We think investors expect sales growth above the guidance range as well. Table 27: Revenue and EBITDA Guidance vs. Actuals 4Q14 1Q15 2015 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17E** Revenue - High End of Guidance $370,000 $390,000 $440,000 $525,000 $665,000 $700,000 $785,000 $850,000 $960,000 $930,000 Revenue Actual $408,619 $424,371 $491,752 $593,972 739,790 147 348 786,928 861,525 984,559 943,626" Revenue Upside $38,619 $34,371 $51,752 $68,972 $74,790 $47 348 $1,9