As with almost everything, timing is an important factor in the stock market. For instance, last year if your business was an e-commerce platform and you were taking it public just as the pandemic hit, chances are the stock could have caught a ride on investors’ love of all things related to online shopping. However, entering the public markets at the tail end of the boom and arriving into a different macro environment is an unfortunate turn of events.
Case in point: Since ContextLogic (WISH) went public at the end of last year, the share price had already been slashed in half – before Wish posted Q1 results on Wednesday. Then the stock sold off some more.
In Q1, the company actually delivered a beat on the top-line, generating revenue of $772 million, amounting to a 75.5% year-over-year increase and coming in ahead of the estimates by $28.94 million. There was a slight miss on the bottom-line as GAAP EPS of -$0.21 – came in $0.03 worse than the Street’s forecast.
MAUs (monthly active users) dropped by 7% year-over-year, while active buyers fell by 20% from the same period last year, a consequence of focusing on higher-LTV (lifetime value) buyers, management said.
The company’s weak guidance didn’t help matters, either. For Q2, Wish anticipates revenue between $715 and $730 million, indicating 2%-4% year-over-year growth, and even at the high end, below the Street’s $731 million estimate.
That said, while Deutsche Bank’s Kunal Madhukar calls the top-line beat “low-quality,” the analyst says Wish has a unique business proposition that “is still a work in progress.”
“We believe the path to becoming the ‘everyday eCommerce platform for the value conscious shopper’ could take time; not surprisingly, management is ‘cautiously optimistic’ about the remainder of 2021. We recognize investor concerns around sustainable growth and TAM, as well as S&M spend and long-term profitability targets; yet, with the shares trading at a significant discount to peers, we think these risks likely are already priced in,” the 5-star analyst opined.
To this end, Madhukar rates WISH a Buy along with a $22 price target. The implication for investors? Upside of 144% from current levels. (To watch Madhukar’s track record, click here)
Overall, Madhukar’s assessment is close to that of his colleagues’. The analyst consensus rates the stock a Strong Buy, based on 6 Buys and 2 Holds. The average price target sits just below Madhukar’s, and at $21.86 suggests shares will gain 142% over the next 12 months. (See WISH stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
