Wayfair (W) Rallied with Top Results

Optimist Fund, an investment management company, released its third-quarter 2025 investor letter. A copy of the letter can be downloaded here. The fund returned +9.1% in the third quarter compared to 7.9% for the benchmark. The firm focuses on acceleration in several cyclical holdings in the portfolio that have been in multi-year downswings, while the world holds attention on the latest developments in AI. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2025.

In its third-quarter 2025 investor letter, Optimist Fund highlighted stocks such as Wayfair Inc. (NYSE:W). Headquartered in Boston, Massachusetts, Wayfair Inc. (NYSE:W) is an online home furnishing store. The one-month return of Wayfair Inc. (NYSE:W) was 15.67%, and its shares gained 155.04% of their value over the last 52 weeks. On October 30, 2025, Wayfair Inc. (NYSE:W) stock closed at $102.40 per share, with a market capitalization of $13.347 billion.

Optimist Fund stated the following regarding Wayfair Inc. (NYSE:W) in its third quarter 2025 investor letter:

“Wayfair Inc. (NYSE:W) – Wayfair delivered one of its strongest quarters in recent years, with accelerating growth, expanding margins, and positive free cash flow. Revenue increased roughly 5% year over year to $3.27 billion — or closer to 6% when adjusting for the company’s exit from Germany — marking its fastest top-line growth since Q1 2021.

Profitability was equally impressive. Wayfair generated $205 million of adjusted EBITDA, representing a margin above 6% for the first time since Q2 2021, and implying a roughly 27% incremental EBITDA margin. This level of operating leverage highlights the powerful earnings potential embedded in the model. If Wayfair can sustain even moderate revenue acceleration at these incremental margins, profitability and free cash flow generation should expand meaningfully — with EBITDA potentially rising from ~$450 million last year to over $2 billion within the next five years.

Overall, the quarter demonstrated a business that is regaining top-line momentum while unlocking significant operating leverage. We believe Wayfair is in the early stages of a multi-year inflection in both growth and profitability that remains underappreciated by the market.”

Wayfair Inc. (NYSE:W) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 46 hedge fund portfolios held Wayfair Inc. (NYSE:W) at the end of the second quarter, compared to 43 in the previous quarter. In the second quarter of 2025, Wayfair Inc.’s (NYSE:W) net revenue increased 5% year-over-year. While we acknowledge the risk and potential of Wayfair Inc. (NYSE:W) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than Wayfair Inc. (NYSE:W) and that has 10,000% upside potential, check out our report about this cheapest AI stock.

In another article, we covered Wayfair Inc. (NYSE:W) and shared Optimist Fund’s views on the company in the previous quarter. In addition, please check out our hedge fund investor letters Q3 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.