As one of the more popular trades on social media, I can’t say that I was caught off guard from the rumblings of the Oct. 28 session for ContextLogic (NASDAQ:WISH) stock.
An e-commerce firm based in the U.S. but with a heavy merchant base in China, ContextLogic has from the start carried significant attention, which resulted in occasional upswings in WISH stock.
Now, I’ve argued that prospective investors should consider other ideas primarily because ContextLogic doesn’t have the substance to be an investment. Rather, WISH stock comes off as a speculative trade, something which proponents pump up only to dump when the price reaches a high enough level. True, my description may be ungenerous, but did you take a look at its chart?
For those who bought at the top, WISH stock objectively classifies as disastrous. And while its recent spike northward may entice fresh speculators, here’s the reality: ContextLogic shares have popped higher several times – even convincingly in some cases – only to disappoint each time.
True, this time could be different (you never know). But my goodness, that’s a risky thesis to live by.
The other problem with WISH stock is the fundamentals. Under normal circumstances, ContextLogic’s business model might be compelling, which typically caters to cheap trinkets manufactured in China. Unfortunately, these are not normal circumstances. Besides the novel coronavirus pandemic, the crisis also contributed to a global supply chain disruption.
Worse yet, with the impact spreading everywhere, The Hill reports that nobody knows what to about the problem. That’s not the most encouraging thing to hear if you’re a ContextLogic stakeholder as the company made a name for itself for cheap products and cheap delivery.
Taking both out of the equation has obviously taken its toll.
WISH Stock and the Reputational Scourge
A few weeks ago, an interesting article popped up on the Wall Street Journal. It ran with the headline that the scariest part of Halloween in 2021 was that the supply chain crisis emptied out shelves for costumes. Smart shoppers made their purchases in September – and some did so in July and August. Otherwise, by October, you were brown stuff out of luck.
I bring this issue up regarding WISH stock because consumers are indeed getting smarter in the new normal. With the supply chain crisis causing havoc in virtually every industry, it’s buy now or forever hold your peace. Moreover, it’s reasonable to assume that at this point, most consumers have got the message. It’s not just about product availability but deliverability.
Thus, we have a two-pronged headwind with WISH stock. First, with many if not most of the popular products on the platform shipped from China, consumers can expect significant delays. Even if the products are sitting on U.S. ports, the supply chain crisis is a holistic one. In the middle of the chain are truck drivers, which are suffering from a shortage.
So in some cases, it doesn’t matter where your orders are sourced from. Bottlenecks from the trucking industry will see to it that you suffer just the same.
Second and just as critically for WISH stock, ContextLogic’s platform doesn’t exactly have the greatest reputation. Reports have circulated that the marketplace distributes fake, illegal and dangerous products.
To be fair, the company claims it has a strict policy against selling counterfeit goods and other illicit activities. Still, when it comes to business, the truth doesn’t always matter if the consumers have their own perception.
And who would want to deal with the hassle of returning products in this messy landscape?
Where is the Positive?
Outside that WISH stock is “cheap,” I’m not sure what speculators see in this investment. As everyone knows, the fundamentals for the retail sector – particularly for companies tied to China-based shipments – are rough. And the technicals for ContextLogic shares are some of the worst that we’ve seen this year.
Of course, if you have clear evidence that this is speculation worth wagering on, by all means be my guest. But anyone who is unwilling to absorb significant losses should probably watch WISH from the sidelines.
On the date of publication, Josh Enomoto 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.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.