If you’re feeling disappointed in mobile e-commerce company ContextLogic (NASDAQ:WISH) in 2021, you’re certainly not alone. The price action of WISH stock has caused substantial capital loss for some folks, unfortunately.
Just to recap, ContextLogic has a fun shopping platform that offers a broad variety of products at a discount. Impressively, the platform was founded in San Francisco in 2010 and is now active in over 100 countries around the world.
With over 90 million monthly active users and 500,000 merchants registered, what could possibly be objectionable about ContextLogic? Despite the seeming success, the price of WISH stock has been beaten down mercilessly.
There’s no denying that some of the data surrounding ContextLogic is negative. I won’t try to sweep the bad news under the rug, but there’s a bull thesis to be made, if you’re willing to extend your time horizon.
A Closer Look at WISH Stock
As you may recall, ContextLogic’s initial public offering (IPO) took place on Dec. 16, 2020. The stock opened at $24, but it didn’t stay there long.
There was an initial burst of enthusiasm among the trading community, which pushed WISH stock to a 52-week high of $32.85 on Jan. 28.
Unfortunately, the good times weren’t meant to last. After topping out, the stock slid for a few months, landing at the $8 level in May.
The investors saw some churn over the summer, followed by another share-price slump into the fall. By Sept. 23, WISH stock had closed at $6.14.
This is what disappointment looks like — or just maybe, it’s an opportunity.
Remember, the essence of contrarian investing is to get in while the pessimism is at its peak.
Let’s Start With the Bad News
Has ContextLogic’s quest to provide heavily discounted items to a global consumer base been successful?
The answer depends on the data you’re looking at. If you’re cherry-picking the negative stats, it’s not difficult to build a bearish thesis.
Case in point: during the second quarter of 2021, ContextLogic took in $656 million in revenues (these are unaudited results).
That’s 6% less than the year-earlier quarter’s result — not horrendous, but still a move in the wrong direction.
Moving over to the bottom line, ContextLogic reported a quarterly net loss of $111 million, which equated to 18 cents per share.
Analysts polled by FactSet expected revenues of $722.9 million and an earnings loss of 13 cents per share. Therefore, ContextLogic posted misses on the top and bottom lines.
Give It Some Time
I suppose you could say that for ContextLogic, honesty is the best policy.
The company is certainly honest in preparing its stakeholders for a lengthy wait time before ContextLogic gets back on its feet:
“The actions we are taking to improve execution and the user experience are expected to strengthen Wish’s operating performance. We do not expect these new initiatives to contribute meaningfully to positive year-over-year results before the second half of 2022.”
Perhaps ContextLogic can achieve this objective. It’s nice to know that the company ended the second quarter with $1.4 million in cash and cash equivalents.
This means that the company has a solid balance sheet. Moreover, ContextLogic really executed in its logistics segment, with revenues improving by 126% year-over-year during 2021’s second quarter.
So, what is the company doing differently now? ContextLogic claims to “have already begun to significantly cut back our digital advertising spend,” for one thing.
Reducing expenses probably isn’t a bad idea.
In addition, ContextLogic is “adding more globally-recognized brands and items that users know and search for,” as well as implementing a new quality-score system in order to prioritize products and merchants that receive positive ratings and feedback from the platform’s users.
The Bottom Line on WISH Stock
Prepare to see some changes in ContextLogic’s e-commerce platform and business practices in the near future.
Change can be a good thing — no doubt about that. Perhaps frustrated WISH stockholders will enjoy a turnaround soon.
Or it might not happen until the end of 2022. The company is preparing you for that possibility, so be patient and don’t give up hope.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
David Moadel has provided compelling content — and crossed the occasional line — on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.