The name ContextLogic (NASDAQ:WISH) might not be familiar to everyone. It’s an e-commerce company that operates the shopping app Wish, which offers bargains on a variety of products. And speaking of bargains, WISH stock has been declining in price quite precipitously over the past year.
Source: sdx15 / Shutterstock.com
So now, it’s a question of whether or not to go bottom-fishing with this quickly deteriorating stock. Just bear in mind, even the cheapest assets can continue to lose value.
Whether WISH stock is a compelling contrarian play or a toxic asset, depends on ContextLogic’s turnaround prospects. As the economy has recovered from the initial impact of the Covid-19 pandemic, it seems that the demand for cheap goods online might not be as robust as it once was.
That’s problematic for ContextLogic and its stakeholders. Other issues include the current chief executive officer’s imminent departure, along with some fiscal stats that won’t provide investors with much solace.
A Closer Look at WISH Stock
Soon, we can celebrate the one-year anniversary of ContextLogic’s initial public offering (IPO), which took place on Dec. 16, 2020. WISH stock opened at $24, and climbed to a 52-week high of $32.85 on Feb. 1, 2021. However, it was all downhill from there.
Painfully, WISH stock broke down below $10 in May, and then $5 in November. There were brief rallies along the way, but clearly the overall trend has been to the downside.
By early December, it was below $3.30 with no end to the carnage in sight.
If the trend is your friend, then ContextLogic isn’t the friendliest company to invest in, it seems.
For the time being, reclaiming $5 should be a short-term objective for the long-term shareholders.
And just remember, hope — or in this case, a WISH — isn’t a viable investing strategy.
Leaving the Ghost Town
I must admit, I really liked InvestorPlace contributor Faizan Farooque’s scathing assessment of ContextLogic’s user growth (or lack thereof).
As he put it, the Wish e-commerce platform has become a “ghost town.” In defense of this evaluation, Farooque observed that ContextLogic’s monthly active users decreased from 90 million in 2021’s second quarter to only 60 million in the latest quarter.
Moreover, the active buyer count declined from 52 million to 46 million over the same period. It seems that the reopening from the Covid-19 pandemic may have weakened the market for discount e-commerce as people spend less time online.
This factor likely contributed to ContextLogic’s dismal third-quarter 2021 fiscal results. Year-over-year, the company’s revenues declined 39%. Moreover, during 2021’s first three quarters, ContextLogic incurred a net earnings loss of $303 million.
That’s much worse than the $176 million net loss from 2020’s first three quarters.
A Transitional Time
Plus, we can add this whopper of a headline into the mix.
Reportedly, Piotr Szulczewski will be stepping down from his position as ContextLogic’s CEO. Szulczewski is the company’s founder, and he served as its CEO for over a decade. He’ll remain on ContextLogic’s board of directors, but this event must still be quite disruptive for the company during this critical time.
Don’t get me wrong — I’m not suggesting that ContextLogic is just standing idly by while the company bleeds money.
Not long ago, ContextLogic introduced the Wish Standards program to incentivize better product quality and “positive behaviors” from the platform’s merchants.
That’s a start, but it might be too little, too late.
If Wish has a reputation for serving up low-quality products, it’s going to take a lot of time and capital to turn that ship around. And at the moment, ContextLogic doesn’t have much of either.
The Bottom Line for WISH Stock
If I’ve painted a bleak picture of WISH stock’s past, present and future, then so be it.
ContextLogic might stage a comeback, but the prospects don’t look good right now.
The most recently reported financial data is discouraging, and ContextLogic’s founder is stepping down from his role as CEO.
With all of that in mind, it’s best to simply leave WISH stock alone until further notice.
On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risk.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
David Moadel has provided compelling content — and crossed the occasional line — on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.
Read More: Path to Profitability Unclear for E-commerce Laggard ContextLogic
