ContextLogic Inc. (WISH) is a mobile e-commerce company that operates Wish, an e-commerce platform that connects users to merchants. The company faces a challenging economic landscape which is affecting its topline growth.
For the fiscal second quarter (ended June 30), WISH’s revenues were $78 million, registering a decrease of 42% year-over-year. Over the past three years, the company’s revenues have declined at a 33% CAGR. Acknowledging the challenges, WISH’s CEO, Joe Yan, stated that the company is taking decisive action to lower costs and improve efficiency.
Given this backdrop, let’s look at the trends of WISH’s key financial metrics to understand why it could be wise to avoid the stock now.
Analyzing WISH’s Financial Trends: Revenue Decline and Decreasing Analyst Price Targets
In recent periods, the trailing-12-month revenue trend of WISH has shown a substantial drop.
In late 2020, specifically on December 31, 2020, WISH reported robust revenue of $2.54 billion. By September 2021, the revenue saw a slight increase, reaching $2.59 billion. However, from the end of 2021 onward, a severe downward trend started to manifest.
The revenue at the close of December 2021 was $2.08 billion and subsequently dropped significantly to $1.5 billion by the end of the first quarter of 2022. Fast forward to mid-2022, WISH faced an even more drastic decrease, with the number landing at $980 million by June 30, 2022.
Moving to the later quarters of 2022, the downtrend continued unabated, with revenues shrinking to $737 million and $571 million by the end of the third and fourth quarters, respectively. This decline continued in 2023, as the values kept diminishing further to $478 million by the end of March 2023 and, most recently, $422 million by the close of June 2023.
In terms of growth rate, using the first and last value, WISH experienced an immense decrease. In raw numerical terms, that's a decrease from $2.54 billion on December 31, 2020, to $422 million taken on June 30, 2023, indicating a significant decline in performance over this period. Here are a few key points:
- Revenue was at its peak on September 30, 2021, recording $2.59 billion.
- A significant downward trend has been observed since the end of 2021.
- The last value of the series denotes revenue of $422 million as of June 30, 2023.
This pattern suggests that recent periods have not been financially favorable for WISH, as evidenced by its continual decrease in revenue.
The gross margin of WISH reveals a decreasing trend and fluctuating changes over time. Here is a summary of the trend from December 2020 to June 2023.
- As of December 31, 2020, the gross margin stood at 62.7%.
- The gross margin reduced to 55.6% by September 30, 2021.
- By the end of 2021 (December 31), it had decreased further to 53.1%.
- The gross margin continued decreasing in 2022, with recorded values of 48.9%, 40.1%, and 35.3% for the end of March, June, and September, respectively.
- By the end of 2022 (December 31), it had slipped to 29.1%.
- The first half of 2023 saw the value dip even further to 25.5% and 22.7% by the end of March and June, respectively.
In summary, the data reveals a persistent reduction in the gross margin of WISH. Between the starting point in December 2020 and the last available data point in June 2023, it has seen a decrease of approximately 40%, highlighting a substantial contraction. It's important to note that the trend puts greater significance on more recent data, with the latest figure at 22.7% as of June 30, 2023.
Here is a summary of the asset turnover trend and fluctuations for WISH:
- As of September 30, 2021, WISH had an asset turnover of 1.38.
- The asset turnover decreased to 1.3 by the end of December 2021.
- In the first quarter of 2022, which ended in March, the asset turnover dropped further to 1.09.
- By the end of the second quarter of 2022, on June 30, it further decreased to 0.82.
- The dropping trend continued, with an asset turnover value of 0.68 by the end of the third quarter of 2022.
- By the end of 2022, it was down to 0.59.
- In the first quarter of 2023, a slight drop to 0.56 was reported in March.
- By June 30, 2023, there was a modest increase in asset turnover to 0.57.
This series of data portrays a clear downward trend in asset turnover over the period from September 2021 to March 2023. It shows a significant decrease - the value decreased by about 59% from September 2021 to March 2023.
After reaching its lowest point, 0.557, in March 2023, there was a slight increase by June 2023. However, the last reported asset turnover still remained low at 0.565. The slight recovery by June 2023 might need further data points to determine whether this marks a change in the previous falling trend.
The below analysis represents the trend and fluctuations of the analyst price target for WISH:
- From November 12, 2021, starting at $6.0, the price target was stable at $5.0 from November 19, 2021, through March 18, 2022.
- There was a significant drop to $2.4 on March 25, 2022, which eventually settled down to $2.0 by April 1, 2022, where it remained steady till June 24, 2022.
- In August 2022, there was another noticeable decrease from $2.0 to $1.75 by August 19, 2022, which held constant until November 11, 2022.
- Late November 2022 saw the target drop to $1.25, and it stayed that way till the start of the new year. In January 2023, the target slid to an all-year low of $0.5, dating from January 13 to March 17, 2023.
- From late March 2023 to mid-April 2023, there were minor fluctuations, leading to an unprecedented hike in the target price. It surged to peak at $13.506 in the week of April 28, 2023.
- Following this high, it gradually declined over the next couple of months, with a noticeable downturn in late May 2023, hitting $7.8 on May 26, 2023, and holding till July 21, 2023.
- As of the most recent data point, on August 17, 2023, the price target stands at $6.25.
A significant conclusion is a downward trend in the price target, with a few periods of stability and a dramatic spike in April 2023.
Analyzing WISH's Share Price: A Downward Trend with Temporary Increases in 2023
Based on the provided data, the following trends and growth rate patterns can be observed for the share price of WISH:
- There's a clear overall downward trend in the price of WISH shares from February 2023 to August 2023.
- Beginning at $19.51 on February 24, 2023, the shares experienced a fairly consistent decrease over the next few months.
- The lowest point during this period occurred on August 16, 2023, with the share price at $5.39.
- However, there were fluctuations within this broad downward trend. For example, there was a slight increase from $11.86 on March 31, 2023, to $12.17 on April 6, 2023, and a more substantial one from $6.67 on July 7, 2023, to $8.30 on July 14, 2023.
In general, this data indicates a negative growth rate for WISH during this considered time frame.
In conclusion, the trend in the share price of WISH appears to be generally declining, with some minor temporary increases during the period from February 2023 to August 2023. Here is a chart of WISH's price over the past 180 days.
Analyzing WISH's Growth, Momentum, and Value Trends in 2023
The POWR Ratings grade of WISH, a stock in the Internet category, has fluctuated over the course of 2023 with its latest data available as of August 17, 2023:
POWR Grade: As of August 17, 2023, WISH holds a POWR grade of D (Sell).
Performance: The POWR grade experienced fluctuations throughout the year. Starting at an F (Strong Sell) grade on February 18, 2023, it improved to D (Sell) by February 25, 2023. This grade fell back to F (Strong Sell) on March 1, continuing till March 7, 2023. Since April 15, 2023, the POWR grade has been consistently maintaining a D (Sell) level.
Rank in Category: Observing the rank-in-category data, WISH seems to witness varied performance within the Internet category comprising 59 stocks. As per the most recent update, WISH sits at the #50 position as of August 17, 2023.
It maintained a position around the mid-50s, notably remaining at the #54 spot from June 17 to July 29, 2023. In overall terms, WISH's POWR grade and their category rank would suggest there remains scope for growth and improvement within the Internet stocks category.
In the POWR Ratings for WISH, the three most noteworthy dimensions are Growth, Momentum, and Value. Over time, these dimensions have exhibited the highest ratings and experienced some clear trends.
Growth
The Growth dimension has shown consistent improvement over time. It begins with a rating of 15 in February 2023 and sees a steady increase month by month. The striking upward trajectory becomes evident as it leads to a rating of 65 by August 2023.
- February 2023: Growth rating was 15
- May 2023: It increased to 51
- August 2023: Growth reached its highest point at 65
Momentum
The Momentum dimension initially starts strong but experiences a decline over time. From February to August 2023, the Momentum rating dropped from 63 to 16.
- February 2023: Momentum begins at a high of 63
- April 2023: There's a significant drop, bringing the rating down to 44
- August 2023: Momentum reaches its lowest point at a rating of 16
Value
Lastly, the Value dimension portrays a positive trend over time. Beginning with a rating of 33 in February 2023, it sees an impressive increase over subsequent months, peaking at 69 in April 2023 and maintaining a stable rating in the high 60s thereafter.
- February 2023: Value starts at 33
- April 2023: It hits a peak rating of 69
- August 2023: It remains strong and steady at 67
In conclusion, while Growth and Value demonstrate a strong positive trend for WISH, the Momentum dimension presents a concerning downward trend that might require attention.
How does ContextLogic Inc. (WISH) Stack Up Against its Peers?
Other stocks in the Internet sector that may be worth considering are Yelp Inc. (YELP), Travelzoo (TZOO), and Expedia Group, Inc. (EXPE) - they have better POWR Ratings.
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WISH shares were trading at $5.46 per share on Thursday afternoon, up $0.07 (+1.30%). Year-to-date, WISH has declined -62.68%, versus a 15.15% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
Should ContextLogic (WISH) Become Part of Your Watchlist? StockNews.com
