Contrarian investors could be looking at beaten-down e-commerce play ContextLogic (NASDAQ:WISH) with increasing interest. Its shares are battered and bruised already, and any persistent selling in high-risk WISH stock could seem overdone soon.

Its price has declined by more than 94% from its January 2021 highs. High short interest at 18% reflects sustained negative investor sentiment. Traders are betting heavily against the company’s future performance.

ContextLogic saw a perfect storm last year and a subsequent 18% sequential decline in annual revenue to $2.1 billion for 2021. Wall Street analysts still expect its sales to decline by 48% year-over-year in 2022 to about $1.08 billion.

Revenue declines, a dependency on China, cash burn and persistent losses may justify the decline in WISH stock. A shrinking business footprint may rationalize a historical price-to-sales (P/S) multiple of 0.5x on the stock while its internet retail industry peers attract an average P/S multiple more than four times higher.

Given a market capitalization of $1.14 billion at Friday’s close, ContextLogic is close to being valued at its cash and near-cash balances. Little to no value is attached to its other assets, including brands, business operations, licenses, software and its e-commerce platform.

ContextLogic retained about $1 billion in cash, cash equivalents and marketable securities and had just $16 million in debt on December 31, 2021. The company’s most recent market capitalization implies investors attach little value to almost everything else associated with ContextLogic but cash.

This invokes some contrarian thinking: Could the selloff in WISH stock be overdone?

One big valuation concern on ContectLogic’s stock is the company’s persistently negative cash flow. Wall Street analysts estimate first-quarter 2022 free cash flow will be a loss of $152 million. If confirmed in upcoming earnings in May, that number will be three times the $50 million cash burn reported for the fourth quarter of last year. However, there’ll still be some seasonality effect and non-recurring staff rationalization expenses in the mix.

Persistent cash bleeds don’t help the case for a buy-the-dip contrarian play on Wish stock. That said, analysts see cash burn rates narrowing significantly going into 2023. The rate of annual cash bleeds could decline from $261 million in 2022 to $100 million in 2023 if revenue rebounds to about $1.6 billion as expected.

Quarterly operating costs have significantly declined. Management’s plans to lay off about 15% of the company’s staff complement could lower operating costs. Meanwhile, an exit from small markets to focus on predominantly North America and Western Europe may improve operational efficiencies.

The bigger picture is that ContextLogic has enough cash resources to see it through a two-year turnaround – if the plan works out. There’s some chance for WISH stock to survive near-term bleeding and create value for contrarian buyers.

Investors won’t value ContextLogic as a distressed asset once it starts showing signs of a return to sales growth in 2023. However, the risk is just too high right now.

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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.