Wish Stock Forecast: ContextLogic Rock Bottom or Rock Solid Buy?
In one of the most disappointing showings this year, Wish stock is down about 80%. The e-commerce platform’s stock keeps bleeding as investor sentiment worsens. But, with all the doom and gloom talk, is it a buying opportunity?
We all know what’s happened to other meme stocks that have been deemed dead in the past, such as GameStop (NYSE: GME) and AMC Entertainment (NYSE: AMC). Yet, not even the Reddit crowd seems too keen about the company’s prospects going forward.
ContextLogic (Nasdaq: WISH), the parent company of Wish, is looking to turn the company around despite disastrous Q3 earnings. However, with the CEO stepping down and a significant drop in users, things are looking bleak.
With a new COVID-19 variant weighing on the overall market, can the marketplace start attracting users again? Let’s see what’s in store for Wish stock.
What’s Wish Stock All About
Wish is one of the largest e-commerce platforms that mainly sells cheaper goods for those who don’t know. Particularly, Wish connects Chinese sellers to buyers globally, promoting the value-driven model. But, this is creating issues with users receiving poor quality or fake items, driving them away from using the platform again.
With this in mind, Wish stock is down 88% from its highs earlier this year, with investors wary of what’s to come.
History of Wish Stock
The online marketplace went public in late 2020 and has been disappointing ever since. Despite running up to $32.85 shortly after its debut, Wish stock is bleeding out, settling just under $4 a share.
After a series of disappointing earnings, the stock continues dropping. And on top of this, things are not looking much brighter with guidance showing more of the same next quarter.
Where We Are At Now
Wish’s latest earnings is another chapter in the company’s poor performance since going public. The marketplace is seeing fewer users and lower revenue.
Not only that, but without a replacement for the CEO, the company’s future is up in the air. With this in mind, the company does have a turnaround strategy in place, but will it be enough to please investors?
Wish Stock Analysis
Looking at Wish’s stock chart, you would assume it’s a failing company. After an initial run, the graph looks like a downward ski slope, with Wish stock price dropping basically all year.
Despite this, Wish is also at its cheapest value as the stock has yet to find support.
Speaking of support, Wish stock is at its lowest price ever, just shy of $3.90. Additionally, the asset seems to be trading in a falling wedge right now, as the price continues falling in a tight range.
Right now, technically, nothing indicates Wish stock is a buy, other than the fact that it has never seen prices this low. But, that doesn’t mean it can’t go any lower. If the company starts producing results, we could see prices bounce due to the higher short interest.
However, until then, there are better setups in the market.
Looking at Wish’s fundamentals doesn’t exactly convince me it’s a buy, either. With the dramatic drop in share price this year, Wish stock is the cheapest it’s ever been in terms of value. It’s current market cap is at 2.52 billion, in Q4 of 2020 it was 10.71 billion. Current enterprise value is 1.32 billion, which is significantly lower than its Q4 2020 value of 9.65 billion.
Wish stock is much cheaper in nearly every aspect. And on top of this, short interest is upwards of 25%. Signaling investors are betting the asset has more room to fall.
Although Wish’s fundamentals are improving, it doesn’t necessarily signal a buy. In fact, until the company shows it can continue attracting users, Wish share prices are vulnerable to continue falling further.
Disappointing Q3 Earnings for Wish Stock
Not only did the company announce its CEO is leaving, but their Q3 result shows the marketplace is losing ground.
- Total Revenue dropped 39% from $606 million last year to $368 million.
- Core Marketplace Revenue fell 55% to $183 million.
- ProductBoost Revenue also fell 25% to $37 million.
- Logistics Revenue down 3% from where it was last year.
Generally speaking, management is saying the drop in revenue is due to supply chain challenges and a lack of trust from users. In spite of this, in July, Wish cut back heavily on the amount it was investing in digital ads to focus on improving retention.
With this in mind, Wish stock isn’t going under anytime soon with over $1 billion in cash on hand. And investors will be pleased to hear the company has plans to turn things around.
The Turnaround Strategy
Part of Wish’s plan to turn things around is cutting back on ad spending to focus on its existing users. The company is planning to study repeat customers to learn the products they are buying. This way, they can promote better quality items. That said, the turnaround plan consists of two primary points:
- Increase user confidence in the platform.
- Provide a more “differentiated and engaging” user experience.
So far, the company is making progress towards its goals. It first took steps to improve confidence through its Wish Standards program. The new program rewards sellers for higher-quality experiences. In turn, it highlights the top-performing merchants on its platform.
Secondly, Wish is trying to improve the shopping experience with Wish Clips. The new feature brings users closer to the product with live video shopping abilities. In light of this, the company plans on building one of the biggest libraries of shoppable videos.
And lastly, the company is partnering with Klarna to offer ‘Buy Now, Pay Later’ for its customers. The partnership is expected to drive additional sales and traffic.
As can be seen, the company is doing what it can to improve its image from a “cheap marketplace” to a “value marketplace.”
Wish Stock Forecast – Where Do We Go From Here?
With Wish stock down 80% this year, will it sink lower? Or, will it finally break out of its downtrend?
Well, in the short term, management is expecting lower revenue next quarter despite the holiday season. As part of its restructuring, Wish is spending less on ads to focus on its existing users. The idea here is, by learning the best merchants, they will then be able to promote better quality goods rather than the previously labeled “cheap” goods.
The marketplace has several challenges ahead, with competition gaining market share and supply chain issues continuing.
On the other hand, as a beaten down, high-interest stock, even the most minor catalyst can send share prices sailing. Keep in mind that Wish’s now 2.55B market cap can make a potential buyout target for larger companies looking to further their digital efforts. All in all, until the platform can show improvement, it looks like there’s better investment opportunities in the market.
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About Pete Johnson
Pete Johnson is an experienced financial writer and content creator who specializes in equity research and derivatives. He has over ten years of personal investing experience. Digging through 10-K forms and finding hidden gems is his favorite pastime. When Pete isn’t researching stocks or writing, you can find him enjoying the outdoors or working up a sweat exercising.