E-commerce may have experienced a boon during the COVID-19 pandemic, but not all companies were able to retain their user bases as economies reopened.
ContextLogic (WISH) has been plagued by several downside catalyzing forces, most notably a multi-quarter declining monthly active user (MAU) rate. The company is undergoing strategic shifts to remain relevant, but their efforts have yet to materialize. (See Insiders’ Hot Stocks on TipRanks)
Scott Devitt of Stifel Nicolaus published a neutral report on the online marketplace platform, which recently printed another quarter of unimpressive earnings results. He noted that the company not only missed on revenue, but also guided Q4 lower and announced it intends to further tighten its marketing expenses.
Devitt rated the stock a Hold, and lowered his price target to $5. This is down from previous target which stood at $7 per share, and now indicates a possible 12-month downside of 9.1%.
The five-star analyst explained that the firm experienced yet another quarter of declining users and revenue, and is now shifting its senior management in hopes of a brighter year-end.
In addition to the removal of its current CEO from his post, WISH is prioritizing enhancing the quality of both its products and sellers. Devitt explained that the new Wish Standard program “seeks to measure merchants across different categories including quality, shipping experience, policy compliance, and customer reviews.” Merchants will be incentivized with commission discounts and validating badges to maintain high standard scores.
It is imperative for the company to engage users during the current quarter, as it traditionally brings with it lucrative opportunities considering the holiday shopping season. The analyst added that WISH is planning to incorporate social elements to its e-commerce experience, live shopping shows, revamped discovery and home pages, and “shoppable video content.”
Taking a look at TipRanks’ Website Traffic data, the persisting trends for WISH are blaringly evident. Total estimated device visits to wish.com have dropped 29.2% quarter-over-quarter. During that same period, the share price fell 56.3%. The year-to-date comparison between 2020 and 2021 shows a 3% decline in online volume.
WISH relies directly on its website and mobile platform for consumer engagement and order rates, thus these numbers are highly discouraging for the long-term investor. That is, unless the company can turn around its fate.
Disclosure: At the time of publication, Brock Ladenheim did not have a position in any of the securities mentioned in this article.
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