Buy WISH stocks before they bounce back from this steep drop
It pays to follow the actions of memes. Several obscure names have exploded this year. But now that the momentum wears off, value investors have an opportunity to choose their niche. A name that should appear on all speed cameras is ContextLogic (NASDAQ:TO WISH), which lost 24.5% of its value last month.
ContextLogic is an ecommerce game targeting the value-conscious consumer.
In 2020, global e-commerce retail sales were $ 4.28 trillion and are expected to reach $ 5.4 trillion in 2022 by Statista.
A large part of these numbers will represent the value conscious consumer, who is not looking for luxury or a high standard, but rather a good deal with satisfactory quality. This is a competitive advantage for ContextLogic over larger peers.
In addition, as Mark Hake points out in this excellent article, Amazon (NASDAQ:AMZN), Ali Baba (NYSE:BABA) and eBay (NASDAQ:EBAY) are all significantly more expensive than ContextLogic, which is just the right price after going down almost 30%.
WISH Stock: An Exciting Ecommerce Game at a Discounted Price
In 2020, ContextLogic’s discovery-driven app was also one of the most downloaded shopping apps in the United States, ranking third behind Amazon and Walmart (NYSE:WMT) with 30 million downloads.
Overall he finished behind Amazon and Shopee, a Singaporean e-commerce online shopping platform popular in Southeast Asia and Taiwan.
Through an S-1 repository, the company connects more than 100 million monthly active users in more than 100 countries to more than 500,000 merchants offering approximately 150 million items mainly from Chinese suppliers.
A large majority of purchases are made through the mobile application. This is a great model for attracting and meeting the needs of low-income consumers who may only have access to the internet through their phones.
In addition, 75% of WISH users have a family income of less than $ 75,000. So investors worried that high-end products may not feature prominently on the app should be quiet.
WISH benefits from a lightweight asset model and a user-centric platform. Customers can enjoy a personalized scrolling feed tailored to consumer interests.
According to the WISH 10-K 2020 filing, over 70% of sales involve no search query. And with WISH spending 67% of its 2020 revenue on marketing and sales, expect that number to continue to grow as the ecommerce company maximizes Average Revenue Per User (ARPU).
Chinese sellers are not a cause for concern
One concern that investors may have when investing their capital in WISH stocks could be the sale of potentially low-quality commodities offered by traders.
Nothing erodes trust like defective products, but the company has you covered, too.
ContextLogic increased the number of Monthly Active Users (MAUs) to 108 million in 2020, down from just 21 million MAUs since 2015. The foundation for this growth has been an ever-evolving quality control process. ContextLogic requires full documentation and verification to register merchants and tackle counterfeit products.
Concerns about the potential escalation of the US-China trade war are real, but the current administration is using a softer approach.
The sale of ContextLogic is a great opportunity to increase exposure to a fast growing ecommerce player at a reduced price. The advantage is too good to ignore. Almost all verticals are expected to expand over the next several years.
The company has $ 2 billion in cash after the IPO and no long-term debt. Most of its liabilities are current, so there are no short-term liquidity issues. ContextLogic is poised to generate positive cash flow as well.
Competition in e-commerce is tough, but Millennials and Gen Zs entering the market in search of affordable products are a huge demographic.
With extreme bargains, a ‘scavenger hunt’ experience and an easy to use app, they will continue to flock to ContextLogic. It goes without saying that this will lead to substantial growth in revenues and margins. The WISH action will in turn be a net beneficiary.
Reddit mania rocketed stocks to $ 15 from a loss of $ 7.52 per share over 52 weeks. Considering an 18.9% short interest, investors shouldn’t hold their breath for another short squeeze. But if they are looking for a long-term investment, WISH stock is a tempting option among a sea of overvalued tech stocks.
At the date of publication, Faizan Farooque did not hold (directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to the publication guidelines of InvestorPlace.com.
Faizan Farooque is a contributing author of InvestorPlace.com and many other financial sites. Faizan has several years of stock market analysis experience and was a former data reporter at S&P Global Market Intelligence. His passion is helping the average investor make more informed decisions about their portfolio.