For quite some time, I’ve expressed my skepticism about ContextLogic (NASDAQ:WISH), the e-commerce platform that helps connect buyers with merchants. Typically a place to acquire cheap trinkets, on paper, the concept undergirding WISH stock made plenty of sense.
Enter the devastation of the coronavirus pandemic and you had an even better reason to put ContextLogic on your radar. With people gravitating toward e-commerce during the crisis, WISH stock presumably enjoyed a massive addressable market. During the heady early days of 2021, it seemed that the security would make early believers millionaires.
Instead, the opposite was becoming reality. People suffered devastating losses. Worsening matters, the buy-the-dip mentality – which proliferated various social media channels – only caused investors to lose even more money.
Finally, after severe losses, some folks surely reasoned that the pain couldn’t get any worse. But with a year-to-date loss of 31%, the uncomfortable truth is that, so far, the situation is worsening still. Therefore, if a recovery for WISH stock was even close to being viable, all the stars would have to align perfectly.
I think the most ardent believer in ContextLogic would grant me that. Unfortunately, as with so many other investment categories, Russian President Vladimir Putin had other ideas.
In a move described as reckless across the board, Putin gave Russian troops the go-ahead to invade Ukraine under multiple bizarre and false pretexts. Though major U.S. market indices are responding well considering the circumstances, investors themselves are jittery.
That he would make such a devastating and unnecessary military action is enough to give you pause, not only about WISH stock but for the stability of the global economy. And it’s these types of questions that the e-commerce platform didn’t need.
World Politics to Hit WISH Stock
While some pundits state that the Ukraine crisis is just centered on one country, they couldn’t be more wrong. Due to our globalized economy, a major assault like this will have ripple effects, particularly on international supply chains which could negatively affect WISH stock.
But wait – isn’t ContextLogic mostly levered to China? Why then would armed conflict in Ukraine impact WISH stock?
To be sure, this flashpoint isn’t directly related to ContextLogic (aside from any merchandise from Ukraine that shoppers were interested in). Rather, it comes down to the price of energy. With crude oil soaring during the last several weeks because of the tensions that eventually culminated in violence, it’s almost certain now that prices will swing even higher.
Everyone knows that Russia is a major oil exporter. So the global supply – at least for the free and rational world – has shrunk. High demand, low supply, higher prices.
Although this dynamic hurts every company, firms like ContextLogic – which again largely specializes in cheap trinkets – will suffer disproportionately. The reason why people are jumping to the Wish platform is to get cheap goods. When those goods aren’t that cheap anymore, revenues might slip below expectations.
More critically, the widening net losses suggest that with energy price pressures, ContextLogic would have a much more difficult road to profitability. At a time when investors don’t have the patience for risk-on assets in an incredibly risky environment, prospects for WISH stock appear dim, to put it very diplomatically.
As well, you must consider the soaring consumer inflation problem. With the purchasing power of the dollar shrinking, people are more likely to focus their declining budgets on the essentials, not cheap discretionary purchases that again are not that cheap anymore.
Listen to the Consensus
Of course, you are free to believe whatever you like. It’s not impossible for WISH stock to drive higher for a good reason I overlooked – or for no reason at all.
However, InvestorPlace contributor Chris MacDonald brought up an excellent point. Recently, covering analysts for WISH stock have either downgraded the security or put sell ratings on it. I understand there’s a common belief on the blogosphere that analysts are dimwitted fools or something to that nature.
Still, when a large consensus of expert opinions say largely the same thing about a particular stock, I think it’s worthwhile to listen. And if you don’t care about that, you might want to consider the explosions a few thousand miles to the east.
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.