Is This Internet Stock Too Cheap To Ignore Right Now? | Wbactive

Mobile e-commerce company ContextLogic Inc. (WISH) is down 77.6% year-to-date and 82.4% in price over the past year to close the last trading session at $0.70. The stock is trading 83% below the 52-week high of $3.99 it hit on Nov. 29, 2021.

WISH’s forward price/sales of 0.84x is 2.8% lower than the industry average of 0.87x. Its forward price/book of 0.92x is 64.8% below the industry average of 2.61x.

In the third quarter, the company’s monthly average users (MAUs) fell 60% year over year to 24 million. Active LTM (Last Twelve Months) users also fell 65.2% year over year to 16 million. The company’s marketplace revenue fell 77% year over year to $51 million, while logistics revenue fell 50% year over year to $74 million.

WISH’s revenue decline in the third quarter reflects lower marketing spend in the face of the high inflation and rising interest rate environment, as well as the company’s new pricing practice, which was fully felt in the most recent quarter. The company expects adjusted EBITDA loss of between $90 million and $110 million in the fourth quarter.

With inflation remaining uncomfortably high and the Fed’s final rate likely to be higher, the economy is expected to enter a recession by early next year. This is expected to significantly impact consumer spending and further weigh on WISH’s finances.

In addition, the Company also received a letter of non-compliance from NASDAQ on October 28, 2022 as the NASDAQ listing rule requires that listed securities maintain a minimum bid price of $1 per share.

The following could impact WISH’s performance in the coming months:

weak finances

For the third fiscal quarter ended September 30, 2022, WISH revenue decreased 66% year over year to $125 million. Adjusted EBITDA loss increased 216.7% year over year to $95 million. The company’s total assets decreased 29% to $911 million compared to $1.28 billion for the year ended December 31, 2021.

Gross profit fell 79.6% year over year to $34 million. Also, net loss rose 93.7% year over year to $124 million. Additionally, its loss per share rose 80% year over year to $0.18.

Unfavorable analyst estimates

WISH’s FY2022 and FY2023 EPS is expected to remain negative. Revenue for fiscal 2022 is expected to decline 71.2% year over year to $600.02 million.

Low profitability

WISH’s 12-month leveraged FCF margin is negative compared to the industry average of 1.35%. Likewise, the net profit margin for the trailing 12 months is negative compared to the industry average of 5.12%. Also, the trailing 12-month EBITDA margin is negative compared to the industry average of 11.05%.

POWR ratings reflect a bleak outlook

WISH has an overall rating of F, which is equivalent to Sell in our comparison POWR ratings System. The POWR ratings are calculated considering 118 different factors, with each factor being optimally weighted.

Our proprietary rating system also ranks each stock across eight different categories. WISH has a D grade for quality, consistent with its poor profitability.

It has a D-score for sentiment, in sync with the weak analyst estimates.

WISH ranks 54th out of 58 F-rated stocks Internet Industry. click here to access WISH’s Growth, Value, Momentum and Stability ratings.

bottom line

WISH is trading below its 50-day and 200-day moving averages of $0.79 and $1.54, respectively, indicating a downtrend. Although trading at cheap valuations, consumer facing companies like WISH are expected to be hit hard by the expected recession next year.

Analysts are pessimistic about WISH’s prospects. Given the company’s weak financial position and low profitability, the stock might be best avoided right now.

How does ContextLogic Inc. (WISH) work Stand your ground against your competitors?

WISH has an overall POWR rating of D, which equates to a sell rating. Therefore, one should consider investing in other B-rated (buy) Internet stocks such as B. Yelp Inc. (WHINE), trivago NV (TRVG) and Expedia Group, Inc. (EXPERIENCE).

WISH shares traded at $0.70 per share on Thursday morning, up $0.02 (+2.51%). Year-to-date, WISH is down -77.49% versus a -14.29% gain in the benchmark S&P 500 over the same period.

About the author: Dipanjan Banchur

Ever since he was in elementary school, Dipanjan was interested in the stock market. This led to a master’s degree in finance and accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a keen interest in reading and analyzing emerging trends in the financial markets. More…

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