Is This Internet Stock Too Cheap To Check Out Right Now?

Mobile e-commerce company ContextLogic Inc. (REQUEST) fell 77.6% year-to-date and 82.4% year-to-date to close the last trading session at $0.70. The stock is trading 83% below its 52-week high of $3.99 hit on November 29, 2021.

WISH’s forward Price/Sales ratio of 0.84x is 2.8% below the industry average of 0.87x. Its forward price/book of 0.92x is 64.8% below the industry average of 2.61x.

In the third quarter, the company’s monthly average users (MAU) fell 60% year-on-year to 24 million. Its LTM (Last Twelve Month) active users also fell 65.2% year-over-year to 16 million. The company’s marketplace revenue fell 77% year-over-year to $51 million, and logistics revenue fell 50% year-over-year to $74 million.

WISH’s revenue decline for the third quarter can be attributed to lower marketing costs amid a high inflation and rising interest rate environment and a new pricing implementation by the company that was fully effective during the last quarter. The company expects an adjusted EBITDA loss of $90 million to $110 million in the fourth quarter.

With inflation remaining uncomfortably high and expectations for a higher Fed rate hike, the economy is expected to enter recession by early next year. This is expected to have a significant impact on consumer spending and further strain WISH’s finances.

In addition, the company received a non-compliance letter from NASDAQ on October 28, 2022, as the NASDAQ Listing Rule requires listed securities to maintain a minimum bid price of $1 per share.

Here’s what could affect WISH’s performance in the coming months:

Poor Finances

For the fiscal third quarter ending September 30, 2022, WISH’s revenue fell 66% year over year to $125 million. Its adjusted EBITDA loss increased 216.7% year over year to $95 million. The company’s total assets were $911 million, down 29% from $1.28 billion for the fiscal year ended December 31, 2021.

Its total profit decreased by 79.6% year-on-year to 34 million dollars. Also, its net loss increased by 93.7% year-on-year and reached 124 million dollars. In addition, its loss per share increased 80% year-over-year to $0.18.

Negative Analyst Estimates

WISH’s EPS is expected to remain negative for fiscal 2022 and 2023. Its revenue for fiscal 2022 is expected to fall 71.2% year-over-year to $600.02 million.

Low profitability

WISH’s trailing 12-month leveraged FCF margin is negative compared to the industry benchmark of 1.35%. Likewise, its trailing 12-month net income margin is negative compared to the industry benchmark of 5.12%. Also, its trailing 12-month EBITDA margin is negative compared to the industry benchmark of 11.05%.

POWR Ratings Reflect Gloomy Outlook

WISH has an overall rating of F, which equates to a Sell with us POWR ratings system. POWR Ratings are calculated by considering 118 different factors, and each factor is weighted optimally.

Our proprietary rating system rates each stock based on eight different categories. WISH has a D for Quality, consistent with its low profitability.

It has a D rating for Sentiment, in line with weak analyst estimates.

WISH is ranked 54th out of 58 stocks in the F ranking Internet industry. Click here Access the WISH rankings for Growth, Value, Momentum and Stability.

Bottom line

WISH is trading below its 50-day and 200-day moving averages of $0.79 and $1.54, respectively, indicating a bearish trend. Despite trading on the cheap, consumer-facing businesses like WISH are expected to be badly hit by the expected recession next year.

Analysts are bearish on WISH’s prospects. Given the company’s weak financials and low profitability, the stock is best avoided now.

ContextLogic Inc. How (WISH) works Stack Against Peers?

WISH has an overall POWR Rating, which is equivalent to a Sell rating. Therefore, Yelp Inc. should consider investing in other Internet stocks rated B (Buy) such asYELP), trivago NV (TRVG) and Expedia Group, Inc. (EXPE).

WISH stock traded up $0.02 (+2.51%) at $0.70 a share on Thursday morning. Year-to-date, WISH has declined -77.49% versus a -14.29% increase in the S&P 500 benchmark index over the same period.

About the Author: Dipanjan Banchur

Since studying in high school, Dipanjan was interested in the stock market. This led to him obtaining a Master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a keen interest in reading and analyzing emerging trends in financial markets. More…

Additional Resources for Stocks in This Article

Source link