Contextlogic Is a Falling Knife You Should Not Touch

  • ContextLogic (WISH) has risen 24% in the past two weeks, perhaps showing it’s reached a bottom.
  • Both the economic environment and the fundamentals of WISH stock aren’t looking good.
  • Avoid WISH stock as it sorts out its ailing revenue.
Closeup of mobile phone screen with logo lettering of wish (owned by ContextLogic) shopping app, blurred website background (focus on center of logo)
Source: Ralf Liebhold / Shutterstock.com

ContextLogic (NASDAQ:WISH) is one of the most volatile stocks and has been falling consistently since its initial public offering (IPO). However, the stock has recently started going up. The price of WISH stock has gone up 24% in two weeks, and it looks like the stock is finally bottoming out.

However, I believe that investors should look at the bigger picture. WISH stock is still down more than 88% from its all-time high and has had multiple short-term recoveries while trending downwards.

Of course, this could indeed be a reversal to the upside. However, looking at the broader economy makes such a scenario highly unlikely. The Federal Reserve currently plans multiple rate hikes, some of which could be higher than the market anticipates. These hikes will drag down fragile stocks, such as WISH.

What’s to Be Excited About With WISH Stock?

The company isn’t financially strong either, nor is it heading towards a recovery. The quarterly net income of ContextLogic hasn’t managed to come out of the negative territory, and its revenue has been falling at a record pace.

The lack of improvement is especially noticeable when you look at the company’s revenue statistics. For the past four quarters, the revenue has only accelerated its downtrend. This quarter, year-on-year quarterly growth declined to -75.52%. Even worse, the quarterly net profit margin of ContextLogic is down by 91.5% to -31.75% YoY.

If the current trend continues, an improvement in its profitability is unlikely. Moreover, the company will have to heavily limit its expansion to reduce its losses.

Judging by the company’s finances, I would avoid investing in WISH stock. The company is on a downwards trend and the current state of the economy will only make it worse. Unless the company manages to present significant surprises, the profitability of WISH is likely to disappoint in the long term.

On the date of publication, Omor Ibne Ehsan 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.

Omor Ibne Ehsan is a writer at InvestorPlace. He is also an active contributor to a variety of finance and crypto-related websites. He has a strong background in economics and finance and is a self taught investor. You can follow him on LinkedIn.


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