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ContextLogic Stock Plummets on Earnings Miss and Rare Double Downgrade

ContextLogic stock plunges after the parent of the Wish mobile e-commerce platform reports a wider second-quarter loss, prompting a rare double downgrade.

ContextLogic  (WISH) - Get ContextLogic, Inc. Class A Report stock plunged on Friday, falling more than 26% at the open, after the parent of the Wish mobile e-commerce platform reported a wider second-quarter loss and an unexpected drop in revenue, prompting a rare double downgrade from J.P. Morgan.

ContextLogic shares were down 26.57% at $6.91 in early Friday trading after the San Francisco company posted a loss of $111 million, or 18 cents a share, vs. a loss of $11 million, or 10 cents a share, in the year-earlier quarter. Revenue dropped to $656 million from $701 million.

Analysts polled by FactSet had been expecting a loss of 13 cents a share on revenue of $722.9 million.

The weaker-than-expected results were driven by a drop-off in activity on the company’s mobile e-commerce platform that connects shopper and merchants - something investors and analysts had expected to increase with the ebbing of the pandemic and a return to more normal consumer shopping activity. 

That, in turn, prompted at least two analyst downgrades, including a rare double downgrade.

ContextLogic Stock Only Has One Trade Setup After Earnings Plunge

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Cowen analyst John Blackledge downgraded ContextLogic to market perform from outperform and lowered his one-year price target to $10 from $18, saying the company’s third-quarter outlook suggests sales could decline 35% sequentially as the business trajectory has softened.

He also “materially” lowered his long-term estimates for sales and earnings before income, taxes, depreciation and amortization.

J.P. Morgan analyst Doug Anmuth took it a step further, double-downgrading ContextLogic to underweight from overweight and cutting his price target by a whopping 70% - to $5 from $17 - on expectations that the company’s revenue outlook does not justify its current share price.

ContextLogic went public in mid-December at an initial public offering price of $24. The stock had a brief five-day run in the sun in June when it rode a short meme-stock-driven wave. However, the shares have fallen more than 51% year to date as of Thursday's close. 

Trading the Meme Stocks: ContextLogic