In the face of significant disruption to supply chain caused by the lingering COVID-19 crisis, ContextLogic stock (WISH) - Get ContextLogic Inc. Report will be a loser in the e-commerce space. At least this is the opinion of research firm Oppenheimer, whose analysts downgraded shares to underperform.
Today, Wall Street Memes looks a bit closer at the bearish argument that came alongside Wall Street’s sixth WISH downgrade in the past two months alone, and that sent share price tumbling even further on Monday, October 4.
(Read more from Wall Street Memes: 2 Meme Stocks With Short Squeeze Potential In October)
Oppenheimer’s bearish case
The research company reported on supply chain issues coming out of Asia, particularly Vietnam and Indonesia, and warned that online retailers stand to lose from the bottlenecks. However, not all digital channel operators should be impacted equally.
For instance, Oppenheimer’s analysts believe that Etsy (ETSY) - Get Etsy, Inc. Report and Farfetch (FTCH) - Get Farfetch Limited Class A Report will do just fine, since products sold on these platforms are mostly sourced locally or outside Asia. Amazon (AMZN) - Get Amazon.com, Inc. Report should also be ok because the behemoth can invest (and has done so) more in distribution than any of its e-commerce peers.
ContextLogic, on the other hand, should be exposed the most to the challenges. Here’s a quote from Oppenheimer about WISH that paints a clearer picture:
“We believe the company is facing a perfect storm of negative challenges heading into 4Q. China accounted for substantially all marketplace/logistics in FY20, exposing WISH to a 393% increase in shipping costs. Further, with ad budgets shifting to Android, digital ad costs have remained elevated throughout 3Q, impacting customer acquisition/retention.”
Wall Street Memes’ take
Not long ago, ContextLogic stock seemed like a good bet in the eyes of Wall Street analysts. But in the past couple of months, shares have suffered a barrage of downgrades, in great part driven by Q2 earnings that did not impress at all.
WISH stock has featured as a popular name among retail investors on Reddit and other online discussion boards. However, with underwhelming financial performance and a short interest of only 12% of the float, it looks like neither fundamentals nor a short squeeze can push WISH share price higher from current levels.
Investors have been picking winners and losers in the e-commerce space. An example of the latter is ContextLogic stock, which has been down 75% since the December 2020 IPO. What do you do?
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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)