July 20, 2024

Brad Marolf

Business & Finance Wonders

Desire Inventory May well Carry on to Drop as ContextLogic Continues to be Unprofitable

Desire Inventory May well Carry on to Drop as ContextLogic Continues to be Unprofitable

The identify ContextLogic (NASDAQ:Desire) may well not be acquainted to everyone. It is an e-commerce corporation that operates the searching application Want, which gives bargains on a wide variety of solutions. And speaking of bargains, Would like inventory has been declining in value rather precipitously over the past year.

The logo and information for the Wish (WISH stock) mobile app are displayed on a smartphone.

Source: sdx15 / Shutterstock.com

So now, it’s a concern of regardless of whether or not to go bottom-fishing with this rapidly deteriorating stock. Just bear in brain, even the most economical property can carry on to eliminate worth.

Regardless of whether Desire inventory is a persuasive contrarian play or a poisonous asset, relies upon on ContextLogic’s turnaround prospects. As the economic climate has recovered from the initial impression of the Covid-19 pandemic, it appears to be that the need for cheap products on the net could possibly not be as sturdy as it once was.

Which is problematic for ContextLogic and its stakeholders. Other challenges include things like the recent main executive officer’s imminent departure, alongside with some fiscal stats that won’t deliver traders with considerably solace.

A Nearer Glance at Would like Inventory

Before long, we can rejoice the 1-calendar year anniversary of ContextLogic’s preliminary public offering (IPO), which took put on Dec. 16, 2020. Desire inventory opened at $24, and climbed to a 52-7 days large of $32.85 on Feb. 1, 2021. Even so, it was all downhill from there.

Painfully, Would like stock broke down below $10 in May, and then $5 in November. There had been brief rallies together the way, but obviously the overall pattern has been to the draw back.

By early December, it was underneath $3.30 with no close to the carnage in sight.

If the pattern is your friend, then ContextLogic is not the friendliest firm to commit in, it appears to be.

For the time remaining, reclaiming $5 should really be a brief-expression objective for the extensive-phrase shareholders.

And just don’t forget, hope — or in this case, a Want — isn’t a feasible investing method.

Leaving the Ghost Town

I need to confess, I definitely liked InvestorPlace contributor Faizan Farooque’s scathing assessment of ContextLogic’s user expansion (or absence thereof).

As he place it, the Would like e-commerce platform has turn into a “ghost city.” In protection of this evaluation, Farooque observed that ContextLogic’s monthly active users reduced from 90 million in 2021’s 2nd quarter to only 60 million in the newest quarter.

Moreover, the active purchaser rely declined from 52 million to 46 million around the identical period. It appears that the reopening from the Covid-19 pandemic may perhaps have weakened the marketplace for price reduction e-commerce as people today devote significantly less time on the net.

This element very likely contributed to ContextLogic’s dismal third-quarter 2021 fiscal benefits. Yr-around-yr, the company’s revenues declined 39%. Additionally, all through 2021’s initially three quarters, ContextLogic incurred a internet earnings loss of $303 million.

That is a great deal worse than the $176 million net loss from 2020’s initially three quarters.

A Transitional Time

Plus, we can increase this whopper of a headline into the combine.

Reportedly, Piotr Szulczewski will be stepping down from his place as ContextLogic’s CEO. Szulczewski is the company’s founder, and he served as its CEO for above a 10 years. He’ll remain on ContextLogic’s board of administrators, but this occasion must continue to be really disruptive for the company in the course of this important time.

Really do not get me mistaken — I’m not suggesting that ContextLogic is just standing idly by when the firm bleeds cash.

Not long ago, ContextLogic released the Want Expectations system to incentivize superior solution excellent and “positive behaviors” from the platform’s retailers.

That’s a get started, but it might be as well little, far too late.

If Wish has a status for serving up reduced-quality goods, it is likely to just take a lot of time and cash to change that ship all-around. And at the instant, ContextLogic does not have much of possibly.

The Bottom Line for Would like Inventory

If I’ve painted a bleak photograph of Want stock’s previous, existing and upcoming, then so be it.

ContextLogic may stage a comeback, but the prospects don’t glimpse superior correct now.

The most lately reported economic data is discouraging, and ContextLogic’s founder is stepping down from his position as CEO.

With all of that in mind, it’s greatest to simply just depart Want inventory by yourself right until even further discover.

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On the day of publication, David Moadel did not have (possibly directly or indirectly) any positions in the securities mentioned in this short article. The thoughts expressed in this short article are individuals of the author, subject matter to the InvestorPlace.com Publishing Guidelines.

David Moadel has provided compelling material — and crossed the occasional line — on behalf of Crush the Avenue, Market Realist, TalkMarkets, Finom Team, Benzinga, and (of training course) InvestorPlace.com. He also serves as the main analyst and industry researcher for Portfolio Wealth International and hosts the well-liked economical YouTube channel Wanting at the Marketplaces.