Mobile e-commerce company ContextLogic Inc. (TO WISH) was down 77.6% year-to-date and 82.4% over the past year to close the latest trading session at $0.70. The stock is trading 83% below the 52-week high of $3.99, which it reached on November 29, 2021.
WISH’s futures price/sales of 0.84x is 2.8% below 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 user (MAU) count fell 60% year-over-year to 24 million. Its LTM (Last Twelve Months) active users also fell 65.2% year-on-year to 16 million. The company’s marketplace revenue fell 77% year-over-year to $51 million, while its logistics revenue fell 50% year-over-year to $74 million of dollars.
WISH’s revenue decline in the third quarter can be attributed to lower marketing spend amid high inflation and rising interest rates and the new pricing practice implemented by the company, which been fully effective during the last quarter. The company expects an adjusted EBITDA loss of between $90 million and $110 million in the fourth quarter.
With inflation remaining uncomfortably high and the Fed’s final interest rate expected to be higher, the economy is likely to slip into recession by early next year. This is expected to significantly affect consumer spending, which will further strain 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 listed securities to maintain a minimum offering price of $1 per share.
Here is what could influence WISH’s performance in the coming months:
For the third fiscal quarter ended September 30, 2022, WISH’s revenue decreased 66% year-over-year to $125 million. Its adjusted EBITDA loss rose 216.7% year over year to $95 million. The company’s total assets decreased 29% to $911 million from $1.28 billion for the year ended December 31, 2021.
Its gross profit fell 79.6% year-over-year to $34 million. Additionally, its net loss widened 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 EPS for fiscal 2022 and 2023 is expected to remain negative. Its fiscal 2022 revenue is expected to decline 71.2% year-over-year to $600.02 million.
WISH’s trailing 12-month leveraged FCF margin is negative, compared to the industry average of 1.35%. Likewise, its trailing 12-month net income margin is negative compared to the industry average of 5.12%. Additionally, its trailing 12-month EBITDA margin is negative compared to the industry average of 11.05%.
POWR ratings reflect bleak outlook
WISH has an overall F rating, which is equivalent to Selling in our POWR Rankings system. POWR ratings are calculated by considering 118 separate factors, with each factor weighted to an optimal degree.
Our proprietary scoring system also rates each stock against eight distinct categories. WISH has a D rating for quality, consistent with its low profitability.
It has a D rating for Sentiment, in line with low analyst estimates.
WISH is ranked #54 out of 58 stocks in the F-rated the Internet industry. Click here to access WISH’s ratings for Growth, Value, Momentum and Stability.
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 a cheap valuation, consumer-oriented companies like WISH are likely to be hit hard by the expected recession next year.
Analysts appear bearish on WISH’s outlook. Given the weak finances and low profitability of the company, it is better to avoid the action now.
How ContextLogic Inc. (WISH) Works Compare yourself to your peers?
WISH has an overall POWR rating of D, which is equivalent to a sell rating. Therefore, one should consider investing in other Internet stocks with a B (buy) rating, such as Yelp Inc. (YAP), trivago AG (TRVG) and Expedia Group, Inc. (EXPE).
WISH shares were trading at $0.70 per share Thursday morning, up $0.02 (+2.51%). Year-to-date, WISH is down -77.49%, compared to a -14.29% rise in the benchmark S&P 500 over the same period.
About the Author: Dipanjan Banchur
Ever since he was in elementary school, Dipanjan had been interested in the stock market. This enabled him to obtain a master’s degree in finance and accounting. Currently, as an investment analyst and financial journalist, Dipanjan is particularly interested in reading and analyzing emerging trends in financial markets. After…
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