Online retailer Wish (WISH), operated by ContextLogic, has long been known for its unusual product lines. YouTube is full of videos involving people ordering things from Wish, from gaming PCs to improbably inexpensive handguns and body armor.
The quality of items on Wish is often wildly variable, and it’s likely that mixed bag of product quality that led one country to shut down Wish altogether. That kind of hostility isn’t good for any company’s long-term prospects, and that’s why I’m bearish on Wish. (See Analysts’ Top Stocks on TipRanks)
Looking at Wish’s stock charts for the year so far is essentially the story of a disaster unfolding. At the start of 2021, things were looking surprisingly good for Wish. Most of January was spent climbing toward the $30 range, which it finally breached on January 28, with a closing price of $30.07 per share. That was when disaster struck, and the company began careening downward.
Mid-April saw a bit of a recovery, but even that was a recovery to just around $15 per share. It was also the start of a second leg down. June offered new hope for a recovery, but even $15 was too much to ask this time, and the company began its third leg down. Today, Wish is trading in the sub-$4 range. (See Wish stock charts on TipRanks)
The latest news will undoubtedly hit Wish fans hard, particularly in France. The entire country is now under orders to remove Wish from its search engine results and online platforms. French government authorities cited issues of product safety for the move.
The French government’s consumer agencies, particularly the General Directorate for Competition Policy, Consumer Affairs and Fraud Control (DGCCRF), analyzed the site and found that a substantial number of products on the site were “dangerous.”
The agency sampled 140 products and found that 45% of toys, 62% of jewelry, and 90% of electrical goods were dangerous in some way. The agency noted that Wish did respond quickly, removing items identified as dangerous within 24 hours. However, the items often returned in different forms later.
Wish itself, meanwhile, is not taking this lying down. The company announced that it was “…starting legal action to challenge what we consider an illegal and disproportionate act.”
If Governments Hate You, It’s a Bad Sign
I had much the same problem with Alibaba (BABA) that I have with Wish. This time, however, most analysts seem to support my stance here. Any time a government is deliberately targeting your business by name—as opposed to just your sector—it’s a very, very bad sign.
Governments have disproportionate levels of power to respond to businesses. A business under fire from these powers will likely lose—and lose big.
Remember back in late 2020, when companies were actually getting delisted from the stock market in the last days of the Trump era? Such a move is an unqualified disaster for businesses. We’re seeing something similar crop up here with Wish; removing it from search engines and the like will undoubtedly hamper Wish’s reach and sales potential.
Worse, the sheer bulk of content out there surrounding Wish doesn’t do it any favors. Watching YouTube videos involving people ordering from Wish involves some of the most questionable products you can find online. I don’t know about anyone else out there, but I’m not exactly enthusiastic about “cheap Chinese body armor.”
Granted, that’s not all Wish sells. Some noteworthy curiosities on the site will undoubtedly make fine collectibles and conversation pieces. The site bills itself as “shopping made fun,” and there’s a perfect case for that.
However, when other sites start talking about you, using phrases like “Browsing Wish is like browsing a store from an alternate universe. With cell phones for $30, and some items even sold for free, you have to wonder if this site’s legitimacy is just wishful thinking,” it’s enough to make anyone doubt.
Wall Street’s Take
Turning to Wall Street, Wish has a Moderate Sell consensus rating, based on three Holds and two Sells assigned in the past three months. The average Wish price target of $5.10 implies 28.5% upside potential.
Analyst price targets range from a low of $4 per share to a high of $6 per share.
Wish fills a place in the shopping ecosystem. By all reports, it fills that place quite well. However, there are clearly potential troubles ahead for Wish.
The economy is starting to turn downward toward recession, limiting the potential for discretionary purchases. When shoppers limit discretionary purchases, Wish takes it on the chin. Throw in entire governments standing against it, and the picture only worsens from there.
Wish has little room to go much further down. Thus, those who want to take a chance on Wish turning itself around can buy in for fantastically low prices right now. Know, however, that you’ll be taking a huge chance here. Wish shutting down altogether seems a lot more likely than Wish suddenly recovering to its January levels. That’s why I’m bearish on Wish.
Disclosure: At the time of publication, Steve Anderson did not have a position in any of the securities mentioned in this article.
Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates Read full disclaimer >