Investors in troubled e-commerce play ContextLogic (NASDAQ:WISH) stock may wish to brace for another quarter of double-digit revenue declines when the company reports its fourth-quarter 2021 earnings results in March. WISH stock investors have already seen the value of their holdings decline 47.4% in the last three months.
ContextLogic runs the wish.com e-commerce store, as well as similarly branded mobile apps downloadable from both Alphabet’s (NASDAQ:GOOGL) Google Play Store, and Apple’s (NASDAQ:AAPL) App Store. The WISH platform provides consumers access to value-priced items.
Huge Challenges Threaten WISH Stock
Due to reported product quality issues, unacceptably lengthy delivery times and frustrating returns/reimbursements turnarounds, ContextLogic ran into serious problems in 2021 (its first year as a publicly listed e-commerce company) and business has been sliding quarter over quarter.
Management of the San Francisco-based company responded by launching a logistics arm, offering financial incentives to vendors with better quality control processes and extending bonuses to users, but that did not stop the bleeding.
ContextLogic’s active customer base has been shrinking for several months, and that could also be a function of the company’s halting advertising spending to limit any bleeding of cash.
However, one data point of hope that could potentially signal a bottoming out on WISH’s revenue, earnings and a recovery in its stock price is the stabilization of wish.com’s active user base. Web traffic numbers are a key data point to track to estimate the company’s e-commerce platform activity.
And web traffic analytics tools predict a serious and persistent problem for ContextLogic’s business.
Web Traffic Plummets
Total mobile and desktop traffic to wish.com’s domain took a further dip in December.
According to publicly available data from web traffic analytics provider Similarweb, the number of total visits to the wish.com website declined by a staggering 21.7% in December to just 40.3 million.
Back in July 2021, traffic to the same domain was estimated at a respectable 85.9 million. Therefore, one may estimate that monthly web traffic to wish.com dropped by more than 53% in just six months to December 2021.
ContextLogic continues to lose visitors to its platforms. The bleeding continued even during an otherwise robust holiday season shopping season.
This new data follows the company’s own disclosure in November that sales dipped by 20% year-over-year in October, despite an early holiday shopping season as customers tried to order gifts early due to supply chain challenges.
Estimated web traffic to wish.com for October was 50.9 million user visits. How much worse could sales have slid in December as total visits declined to 40.3 million? We will know the firm answer soon, but the market may not like the low numbers.
Rivals Did Better
ContextLogic’s woes in 2021 coincided with a general decline in the e-commerce industry. Online shopping declined as economies reopened, retailers re-opened shops and people went outdoors again following relaxed pandemic restrictions during the past year. However, WISH stock’s challenges are unique in beyond those of its rivals.
Other e-commerce platforms seemingly performed better in December. Online sales were up 11% the previous year, according to the Mastercard SpendingPulse report.
For example, Amazon (NASDAQ:AMZN) saw total visits to its flagship e-commerce site amazon.com increase by 4.22% to 2.89 billion.
Likewise, total visits to Etsy’s (NASDAQ:ETSY) online commerce domain etsy.com increased by nearly 7% in December to 480.8 million. Another eBay (NASDAQ:EBAY) could have seen user traffic to ebay.com increase by 3.1% to 845 million in December.
In short, WISH probably saw a double-digit decline in user traffic, just as some of its competitors witnessed a return to e-commerce demand in December.
Busted Growth Story or Promising Turnaround Bet?
Negative sales growth rates could linger for longer and WISH stock may not be appropriately classified as a growth stock anymore. After all, the company has seen quarterly revenue plummet from a peak of $794 million by December 2020 to $368 million by September 2021. Analysts project a 60% year-over-year revenue decline to $313.8 million for Q4 2021.
Faced with potentially insurmountable challenges, the company’s founder and CEO is leaving, and he forfeits 10 million shares awarded in a stock incentive plan. Shares could have vested in December this year if he had stayed.
The hiring of a new CEO to complete the turnaround plan may not be enough to rescue the business this year. The new leader will need time to craft a winning strategy.
Most noteworthy, financial incentives to vendors and customers delay the realization of profits and delay cash flow stability.
In the meantime, the company should hope that its French challenges that included the removal of its mobile apps from app stores in that country won’t spill to the broader European market.
As of now, WISH stock appears more like a busted growth story.
That said, if the company manages to contain customer churn, reinstate advertising programs and stop cash flow bleeding, WISH stock could find a bottom, or even rebound in 2022.
On the date of publication, Brian Paradza did not have (either directly or indirectly) positions in any of the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Brian Paradza is an investing enthusiast who was awarded the CFA Charter in 2019. A strong believer in fundamentals-based, long-term investing, Brian learns from gurus like Warren Buffett but acknowledges human behavioral tendencies that drive short-term “madness.” You may find him inquisitive as he examines tech investing opportunities, cannabis, blockchains and the cryptocurrencies asset class.