ContextLogic (WISH) Crashes 27% on Weak Q2 Results as Demand Slows, At Least 5 Analysts Downgrade Including a Double Downgrade by JPM
Shares of ContextLogic (NASDAQ: WISH) have plunged more than 27% in pre-open Friday after the company reported Q2 sales of $656 million, lower than the $723 million consensus.
The company also delivered a loss of $0.18 per share, again lower than the consensus calling for a loss of $0.13 per share.
“Wish has begun executing on initiatives designed to enhance the user experience and increase engagement on the Wish app following second-quarter results that did not meet our expectations,” said Wish Founder and CEO Piotr Szulczewski.
JPMorgan analyst Doug Anmuth downgraded ContextLogic from “Overweight” to “Underweight,” in addition to an aggressive price target cut to $5.00 (from $17.00).
“While we believe WISH has significant growth potential with current penetration of ~3% of the global target market estimated at 1B+ households, and less than 1% share of the overall $2.1T global mobile commerce market, re-opening and higher ad price environment have impacted user retention, and acquisition. We believe WISH’s new product strategy will need several quarters to show results, and carries execution risk,” Anmuth said in a client note.
BofA analyst Michael McGovern downgraded to “Underperform” from “Neutral” and slashed the price target in half to $6.00 per share on the long road to recovery.
“We recently downgraded to Neutral given monthly user trends, but the loss of users and decline in 3Q is well above our expectations, and retooling the business model is expected to take longer than we envisioned. One positive from the quarter was Wish Local, which ticked up to 10% of orders, vs. 7% last Q, and we think niche initiatives like Local can contribute to a recovery. We lower our PO to $6 (down from $12 prior) based on our DCF that assumes a lower 58mn Active Buyers by 2032 (vs 69mn prior), $7.3bn in revenue (down from $8.3bn prior), and a GAAP operating margin of 10% (vs. 13% prior),” McGovern wrote in a note.
In addition to these two, analysts at Oppenheimer, William Blair, and Cowen also downgraded the stock.
William Blair analyst Ralph Schackart outlines three key factors behind the downgrade call: 1) Lack of visibility in model and Street estimates, 2) Unclear strategic shift, and 3) Total marketplace revenue sequential decline and forecast to continue.