After an IPO opening at $24 and peaking just over $31 in February, the morning number of $10.55 today may not seem all that impressive, but ContextLogic, Inc. (NASDAQ: WISH) may turn out to be one of the better buys of 2021. The price appears to have leveled off and early indicators from Q2 financials being released on August 12th show year-over-year growth of 2-4%.
Those aren’t Amazonian numbers, but they do bode well for an eCommerce platform building brand awareness and tapping into a price-conscious consumer space that is growing rapidly as inflation looms large shortly. With a sharper focus on lifetime value (LTV) and increased monetization efforts, the company appears to be gaining some momentum.
ContextLogic and Consumer Wish Lists
ContextLogic was founded by former Google engineer Piotr Szulczewski in September 2010. It was rebranded as Wish in May 2011 when Piotr’s college friend Danny Zhang joined the team. Their initial goal was to simply fulfill consumer “wish lists.” It wasn’t until 2013 that they became a true eCommerce site with merchants hosting products directly on the website.
Startup funding for ContextLogic totaled $1.7 million coming from a range of investors, including Yelp CEO Jeremy Stoppelman. They’ve done several rounds of fundraising since then and became the most downloaded eCommerce app in the United States in 2018. Their revenue that year was $1.9 billion, doubling their previous number in 2017.
Market Overview and Investor Analysis for ContextLogic
The global eCommerce market is projected at $4.89 trillion in 2021 with an expected growth rate of 21% through 2024. According to Shopify, which holds an 11% market share in the space, online sales now represent 19.5% of consumer spending worldwide. That number was just 13.6% in 2019, before the Covid-19 pandemic.
Competitor Analysis and Revenue Numbers
Comparing Wish to Amazon is like weighing apples against oranges. Wish has been described as an online flea market, with pricing far cheaper than what you’ll find on Amazon, which is the “Walmart” of eCommerce sites. Wish also does business with manufacturers who have lower operating costs, giving them the ability to offer discounts in the 70%-90% range.
Meme Status Boosts Share Prices
The Reddit crowd over at #WallStreetBets discovered Wish back in June and gave them an immediate boost, with share prices rising over $15 for the first time since February. Momentum has cooled off a bit since, but the “people’s choice” of eCommerce platforms is still a leading topic of conversation on social media. Expect another spike in share prices soon.
An August 6th article on Nasdaq, titled “Buy WISH Stock for the Growth Potential,” points out that share prices have been trending up for the past few weeks. They also note that Wish is only half the age of eBay, its closest competitor. During that time, they’ve grown their subscriber base from 21 million to 107 million. Those are solid numbers.
The Bottom Line: Is Wish Worth Investing In?
The net operating loss ($128 million) is a bit disturbing, but the affordable share price and aggressive marketing by ContextLogic makes WISH a value-add stock for an investment portfolio. Prices are unlikely to fall further. Continued sales growth will eventually offset net losses. It’s a long play, but it’s a good one.
Disclosure: Neither Matt Rego nor Spotlight Growth have any position or relationship with any companies mentioned in this article. No payment was made to create this article. This article should not be taken as a solicitation or recommendation to buy or sell any securities. Please conduct your own research and consult your financial advisor to determine your risk tolerance and investment path. We are not licensed brokers or investment advisors.
