Mobile e-commerce company ContextLogic Inc. (WISH) operates an e-commerce platform, Wish, which connects users to merchants. It also provides merchants with marketplace and logistics services. The company’s shares have plummeted 84% over the past year and 69.9% year-to-date to close its last trading session at $0.93.

In addition, the stock is currently trading 85.3% below its 52-week high of $6.31, indicating a downtrend. In the third quarter, the company anticipates an adjusted EBITDA loss in the range of $110 million to $130 million.

Furthermore, the company stated that its plans for accelerated growth in the second half of 2022 might be hampered as it is not immune to changes in consumer spending patterns brought on by macroeconomic factors.

While WISH has been making efforts to launch new initiatives, including the relaunch of a Women's Fashion Category, global supply chain issues could continue to weigh heavily on the e-commerce player's revenue prospects. Therefore, the stock could further witness a pullback.

Here's what could shape WISH's performance in the near term:

Inadequate Financials

WISH's revenue decreased 79.6% year-over-year to $134 million for the second quarter ended June 30, 2022. Its gross profit declined 89.1% from the prior-year quarter to $42 million. The company reported an operating loss of $91 million, while its net loss came in at $90 million.

Its loss per share amounted to $0.13. In addition, its cash and cash equivalents came in at $693 million, representing a decline of 31.3% for the six months ended June 30, 2022.

Negative Profit Margins

WISH's trailing-12-month CAPEX/Sales multiple of 0.31% is 89.8% lower than the industry average of 2.9%. Also, its trailing-12-month ROA, net income margin and ROE are negative 26.5%, 27.8%, and 35.2%, respectively. Moreover, its trailing-12-month negative EBITDA margin of 26.5% compares to its industry average of 11.3%.

Poor Growth Estimates

Street expects the company’s EPS and revenue to decline 14% and 65.6%, respectively, in the current fiscal year. Also, its EPS is expected to remain negative in the current and next years. In addition, WISH failed to surpass the consensus EPS estimates in two of the trailing four quarters.

POWR Ratings Reflect Bleak Outlook

WISH has an overall D rating, which equates to Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. WISH has an F grade for Stability and a D for Quality. The stability grade indicates the stock’s higher volatility than its peers. In addition, its poor profitability is in sync with the Quality grade.

Of the 65 stocks in the F-rated Internet industry, WISH is ranked #55.

Beyond what I've stated above, you can view WISH ratings for Growth, Momentum, Value, and Sentiment here.

Bottom Line

WISH has plunged 35.6% over the past month. Also, it is currently trading below its 50-day and 200-day moving averages of $1.42 and $2.02, respectively, indicating a downtrend. Furthermore, the stock could retreat further, given the persistent macroeconomic uncertainties that might stymie its growth.

Given its weak financials and poor growth estimates, we think the stock is best avoided now.

How Does ContextLogic Inc. (WISH) Stack Up Against its Peers?

While WISH has an overall D rating, one might want to consider its industry peers, Yelp Inc. (YELP), trivago N.V. (TRVG), and Expedia Group Inc. (EXPE), which have an overall B (Buy) rating.

WISH shares fell $0.00 (-0.44%) in premarket trading Thursday. Year-to-date, WISH has declined -70.10%, versus a -19.62% rise in the benchmark S&P 500 index during the same period.

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.

More...