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WISH Stock Is 50% Undervalued, Says Wall Street

After delivering disappointing Q2 results amid a slowdown in e-commerce, WISH traded at all-time lows. However, according to Wall Street, the stock is undervalued and has huge upside potential.

ContextLogic stock  (WISH) - Get ContextLogic Inc. Report has often trended as one of the most popular tickers on the main online discussion boards. Shares of the e-commerce platform joined “meme mania” in early June 2021, when the price climbed more than 80% during that month.

WISH plummeted since it peaked and currently trades at all-time lows of around $6. However, according to Wall Street, consensus price target points at substantial upside from here.

Figure 1: ContextLogic ($WISH) share price chart year-to-date.

Figure 1: ContextLogic ($WISH) share price chart year-to-date.

(Read more from Wall Street Memes: GameStop Or AMC: Why Not Both Stocks?)

Wall Street’s take on WISH

Wall Street analysts’ consensus on the stock is currently neutral. However, based on 10 reports issued on WISH over the last three months, the average price target of $9.81 represents sizable upside potential of over 50% from the current depressed levels.

Here are some of the key arguments on the bull side:

  • Credit Suisse’s analyst Stephen Ju is the most bullish, despite having reduced his price target from $24 to $19. He adjusted his projection lower after ContexLogic missed Q2 revenue and adjusted EBITDA estimates due to lower customer retention and declining usage rates. However, he still sees massive upside potential of nearly 200% from current levels.
  • Loop Capital’s analyst Laura Champine is another bull who recently lowered her WISH price target from $20 to $15. According to her, the company’s outlook for declining sales over the next three quarter disappointed. But the analyst still believes that the stock looks undervalued based on 1.3 times expected 2022 total revenue.
  • Not so bullish, but still seeing 17% upside potential, Citigroup’s analyst Nicholas Jones lowered his price target from $12 to $7.50 and kept a neutral rating on WISH. Q2 earnings results were, once again, cited as the key reason behind the price target reduction. Also, Mr. Jones attributed poor stock performance since the IPO to the company’s difficulty in sustaining its growth, specially due to higher than expected user churn and ad rates.

On the bear side of the argument:

  • Bank Of America’s analyst Mike McGovern, downgraded WISH stock from a neutral to a sell rating while reducing his price target from $12 to $6. In the next 12 months, the analyst believes that top-line trends will get worse before they get better, and the third quarter should bring sizable YoY decline in revenue. On the more positive side, the analyst mentioned Wish Local ticking up to 10% of orders vs. 7% last quarter, which could contribute to longer-term recovery.
  • Even more bearish is JPMorgan’s Doug Anmuth. The analyst downgraded the stock to sell and slashed his $17 price target to $5. He supported his decision on the overall decline in user activity due to the reopening of the economy, alongside company-specific issues like user retention and rising ad costs.

Wall Street Meme’s take on WISH

ContextLogic was a beneficiary of the COVID-19 crisis, as were other e-commerce operators, due to the stay-at-home trends. The question was whether digital retail could sustain growth in a post-pandemic scenario. ContextLogic’s Q2 earnings suggested that the answer might be no, for now.

However, despite the challenges, Wall Street still seems to think that the stock is too cheaply priced. Patient long-term investors who agree with this idea might benefit from buying the stock at current lows, if they can ride out the short-term price pressures.

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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)