ContextLogic’s (WISH) - Get ContextLogic, Inc. Class A Report earnings is just around the corner. The e-commerce company, also known as Wish, will report its third quarter results on Wednesday, November 10, after the closing bell.
The stock, which has a large number of followers on Reddit forums, reached its peak of $32 per share on early February of this year, a couple of months after its IPO. Since then, WISH has lost nearly 80% of its value and currently trades at around $5.
In Q2, a slowdown in e-commerce caused Wall Street to turn more cautious on the company and stock. Below, we discuss what to expect of Wish in Q3.
In the most recent quarter, Wish delivered in-line net loss per share of $0.11, but missed revenues estimates by $66 million. The mildly disappointing Q2 came due to lower demand as competition from physical retail ramped up in a post-pandemic environment.
Total revenue declined 6% year-over-year to $656 million. Strong growth in logistics helped to offset sharp decline in marketplace. User retention dropped despite what Wish has called “more reliable logistics”, which must have disappointed the management team and investors.
Total monthly active users (MAU), declined 22% vs. the same period last year, at 90 million, and last twelve months active buyers decreased 26% YoY to 52 million. The company attributed the MAU decline to lower mobile usage, as stay-at-home restrictions eased around the world.
What to expect in Q3
For Q3, Wall Street is projecting net loss per share of $0.10 and revenues of $373.8 million. For reference, the top-line estimate is nearly half last quarter’s $656 million.
The company provided an action plan to improve execution and user experience. During the last earnings call, ContextLogic said that the company has already begun to significantly cut back on digital advertising spend, and that it would focus on retention of the existing user base next.
To be clear, revenues will probably be lower now than in Q2 due to a pullback in e-commerce activity and supply chain issues. But with paid advertising costs coming down, the company could surprise on margins and earnings, possibly delivering a beat this time.
What analysts are saying
On average, Wall Street has a neutral rating on WISH. Yet, based on the ten most recently published reports, WISH shares are expected to reach $8.61 over the next 12 months, representing very enticing 74% upside potential.
The latest analysis came from Cowen & Co.’s John Blackledge. He is skeptical on the company’s Q3 performance and has lowered his price target from $10 to $6 ahead of earnings, while maintaining a market perform rating.
More bearish, Oppenheimer’s Jason Helfstein sees a perfect storm of challenges heading into Q4. He downgraded WISH stock a month ago to a sell rating and has a $4 price target. The bearish view is backed up by the research company’s report on supply chain issues coming out of Asia, particularly Vietnam and Indonesia.
The analyst has also warned that online retailers in general stand to lose from the bottlenecks – although not all digital channel operators would be impacted equally.
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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)