Head over to Wayfair’s website, and it feels like they’ve turned the place into one giant clearance sale. The Kelly Clarkson-backed company is offloading inventory like they’re emptying out grandma’s attic—except grandma’s old furniture didn’t come with 60% discounts on Pinterest-worthy couches, tables, and chairs that were once the envy of every HGTV designer. If you didn’t know any better, you’d think they were getting ready to close up shop.

This massive markdown madness comes just a month after Wayfair’s CEO, Niraj Shah, was sounding the alarm, comparing today’s demand for home goods to the bleak days of the 2008 financial crisis. And if you’ve been watching Wayfair’s stock, you know it’s about as stable as a two-legged chair. We’re talking a 16% drop this year and a brutal 61% nosedive over the last five years. That’s the kind of chart that will make a grown man cry.

But before we start filing the bankruptcy papers for Wayfair, it’s worth noting that they’re not the only ones struggling to move overpriced dining room tables. Williams-Sonoma, another home-furnishings heavyweight, has also felt the squeeze of a tight housing market. Just last week, they revised their full-year revenue expectations down, predicting a drop of 1.5% to 4%. That’s a far cry from their previous forecast, which had at least some hope of growth.

Now, let’s talk about Wayfair’s August 1st earnings report because the numbers tell a story that’s arguably worse than it looks on the surface. Sure, they posted an adjusted profit of 47 cents per share, just two cents shy of Wall Street’s expectations. But dig a little deeper, and things get messy. Revenue came in at $3.12 billion, down 1.7% from last year, and they missed the $3.18 billion estimate. Even worse, their gross profit shrank by 4.4% year-over-year. If that’s not a sign that customers are clenching their wallets a bit tighter these days, I don’t know what is—especially with spending on home goods down nearly 25% from the peak we saw in late 2021.

Yet, Shah remains hopeful, insisting that people still need mattresses, tables, and chairs. He’s banking on a “reversion to the mean,” which is just a fancy way of saying he’s hoping things will bounce back once the economy and housing market stabilize. 

Some analysts are buying into this optimism. Truist, for instance, lowered its price target on Wayfair to $60 from $70 but kept a buy rating, convinced that the company can weather the storm and come out stronger when interest rates drop. Raymond James also trimmed its price target slightly but stayed bullish, pointing out that Wayfair just delivered its best quarter of cash flow and profitability in three years.

Still, not everyone’s ready to jump on the bandwagon. Argus downgraded Wayfair to a hold, citing “muted prospects” in light of the sluggish housing market and cautious consumer spending. With fewer home sales and higher financing costs, people aren’t exactly rushing out to buy new furniture.

So, what’s the takeaway? It’s definitely a risky play, but I think Wayfair’s current valuation could be an opportunity in disguise. With Jerome Powell hinting at rate cuts in Jackson Hole last week, there’s a chance the housing market could pick up again soon. And when people start buying homes, you can bet they’ll need new furniture to go with them. If Wayfair can weather the current storm, it could be well-positioned to bounce back.

Stock.News does not have positions in companies mentioned.