Is This WallStreetBets Stock Worth Investing In?

San Francisco-based ContextLogic Inc. (WISH) operates as a mobile e-commerce company in Europe, North America, South America, and internationally. WISH was ranked #3 among the most discussed stocks on Wallstreetbets at the time of writing this article. The stock has had…

weak momentum so far this year. WISH shares have plummeted 70% in price year-to-date and 44.4% over the past three months to close its last trading session at $5.47. The stock is currently trading near its 52-week low of $4.61.

Recently, the company shared its plans to improve product quality on its e-commerce platforms. It plans to focus on discovery commerce to attract the next generation of buyers and brands. “We believe the future of e-commerce will be built around the serendipitous discovery of products. By acting as a hub for inspiration, we hope to provoke interest and shape demand and, ultimately, be the pioneers of the next generation of commerce,” said Tarun Jain, Chief Product Officer at WISH. Nevertheless, the company’s bleak financials could be a concern.

Even though the global e-commerce share of total retail sales has been rising for several months, WISH has failed to capitalize on the industry tailwinds. The company’s revenues have declined 39% year-over-year to $368 million in its last reported quarter. And analysts expect its revenues to decline 54.8% in the current quarter and 15.5% in the current year. Also, its EPS is expected to remain negative at least until the following year.

Click here to check out our E-commerce Industry Report for 2021

Here is what could shape WISH’s performance in the near term:

Mixed Valuation

In terms of forward Price/Sales, WISH is currently trading at 1.41x, which is 7.7% higher than the 1.31x industry average. Also, its 4.35 forward Price/Book ratio is 18.8% higher than the 3.66 industry average. However, WISH’s 0.85x forward EV/Sales is 43.5% lower than the 1.50 industry average.

Lawsuits

Law firm Robbins LLP is investigating whether the officers and directors of WISH have violated the Securities Act of 1933 or breached their fiduciary duties during WISH’s initial public offering (IPO) last December. In addition, Lifshitz Law Firm, P.C. announced that a class action was filed against WISH on the grounds of materially false and misleading statements about the strength of its business operations and financial prospects by overstating its then-present monthly active users (MAUs) and MAU growth trends.

Weak Third-Quarter Earnings Report

WISH’s gross profit declined 54.2% year-over-year to $167 million in its  fiscal third quarter, ended September 30. Its loss from operations stood at $63 million, down 19.2% from the same period last year. Its net loss decreased…

 

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