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Is This Internet Stock Too Cheap to Ignore Right Now?

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Mobile e-commerce company ContextLogic Inc.wish) has fallen 77.6% year-to-date and has fallen 82.4% over the past year, closing its last trading session at $0.70. The stock is trading 83% below its 52-week high of $3.99 on November 29, 2021.

WISH’s futures price/sales of 0.84x is 2.8% lower than the industry average of 0.87x. A reservation price of 0.92x is 64.8% lower than the industry average of 2.61x.

In the third quarter, the company’s average monthly users (MAUs) were down 60% year-over-year to 24 million. His Last Twelve Months (LTM) active users also dropped 65.2% year-on-year to 16 million. The company’s market revenue fell 77% year-over-year to $51 million, while its logistics revenue fell 50% year-over-year to $74 million.

WISH’s decline in third quarter revenue can be attributed to lower marketing spending in a high inflation and rising interest rate environment, as well as new pricing practices implemented by the company that worked perfectly in the previous quarter there is. The company expects adjusted EBITDA loss for the fourth quarter to be between $90 million and $110 million.

The economy is expected to slip into recession by early next year as uncomfortably high inflation continues and the Fed’s final interest rate is expected to rise even higher. This is expected to have a significant impact on consumer spending, further straining WISH’s financials.

Additionally, the company received a notice of breach from NASDAQ on October 28, 2022. This is because NASDAQ listing rules require listed securities to maintain a minimum bid price of $1 per share.

Here are some things that may impact WISH performance in the coming months:

weak finances

In the third quarter of the fiscal year ended September 30, 2022, WISH’s revenue decreased 66% year-over-year to $125 million. His adjusted EBITDA loss expanded 216.7% year-over-year to $95 million. The company’s total assets fell 29% to $911 million, compared with his $1.28 billion for the fiscal year ended December 31, 2021.

Gross profit was $34 million, down 79.6% year over year. Also, his net loss expanded 93.7% year-on-year to $124 million. Additionally, loss per share expanded 80% year-over-year to $0.18.

Unfavorable Analyst Estimates

WISH’s 2022 and 2023 EPS are expected to remain negative. Revenue for fiscal 2022 is expected to be $602 million, down 71.2% year over year.

low profitability

WISH’s leveraged FCF margin over the last 12 months is negative compared to the industry average of 1.35%. Similarly, the net profit margin for the last 12 months is negative compared to the industry average of 5.12%. Also, the EBITDA margin over the last 12 months is negative compared to the industry average of 11.05%.

POWR Rating Reflects Dark Outlook

WISH is an overall F rating, equivalent to our sales. POWR rating system. The POWR Rating is calculated by considering 118 individual factors, with each factor being optimally weighted.

Our proprietary rating system also evaluates each stock based on eight different categories. WISH has a D quality rating, consistent with low profitability.

The sentiment grade is D, in line with weak analyst estimates.

WISH ranks 54th out of 58 F-rated stocks. the internet industry. click here Access WISH ratings for growth, value, momentum and stability.

Conclusion

WISH is trading below the 50-day and 200-day MAs of $0.79 and $1.54, indicating a downtrend. Despite trading at cheap valuations, consumer businesses like WISH are expected to be hit hard by the recession expected next year.

Analysts look bearish on WISH’s outlook. Given the company’s deteriorating financial position and low profitability, it would be best to avoid stocks for now.

The ContextLogic Inc. (WISH) Way Do you stack up against that mate?

WISH has an overall POWR rating of D, equivalent to a sell rating. Therefore, Yelp Inc. (bellow), trivago NV (TRVG), Expedia Group, Inc. (experience).


WISH shares were trading at $0.70 a share on Thursday morning, up $0.02 (+2.51%). Year-to-date, WISH is down -77.49%, while the benchmark S&P 500 Index is up -14.29% over the same period.

About the author: Dipanjan Benture

Dipanjan has been interested in the stock market since elementary school. This earned him a master’s degree in Finance and Accounting. Today, Dipanjan works as an investment analyst and financial journalist with a keen interest in reading and analyzing emerging trends in financial markets. more…

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