ContextLogic stock slumps on poor Q2 results


    Shares in Context logic (NASDAQ: WISH), which operates the Wish e-commerce platform, slumped on Friday after the company reported lackluster earnings for the second quarter.

    The company has grown into one of several high-profile “meme stocks” that have gained popularity with retail investors, particularly on Reddit’s WallStreetBets subreddit. This has caused significant volatility in recent months.

    At 1:20 p.m. EDT, ContextLogic stock lost 18%.

    Desire for better results

    Revenue declined 6% to $ 656 million in the second quarter, missing the consensus estimate of $ 722.9 million. This resulted in a net loss of $ 111 million, or $ 0.18 per share, while Wall Street analysts were expecting a net loss per share of just $ 0.13. Wish acknowledged that engagement and demand fell short of expectations.

    “Wish began taking initiatives to improve the user experience and increase interaction with the Wish app after the results in the second quarter did not meet our expectations,” said CEO Piotr Szulczewski. “Our goal is to ensure that users often come to Wish for a fun shopping experience where they can find unique products at affordable prices.”

    In a letter to shareholders, Szulczewski said that “demand slowed due to a number of headwinds”. Vaccination rates have increased in numerous regions, resulting in decreased user activity on Wish.

    The company announced that it saw app installs decrease sequentially by 13% and average time spent on the platform by 15% in the second quarter.

    Combined with decreasing engagement, costs rise. In particular, spending on digital advertising, which was Wish’s primary user acquisition method, grew faster than expected.

    AppleThe recent privacy changes from (NASDAQ: AAPL) surrounding ID for Advertisers (IDFA) have turned the mobile advertising industry on its head, causing many advertisers to postpone their spend on Android. With Android being the preferred platform for “the majority” of Wish users, the following bids among advertisers have driven up ad prices.

    In response to the headwinds, Wish plans to improve product quality and selection, improve the shopping experience, and increase the performance of the app.

    The turning point will take time

    Wish declined a third quarter sales forecast, as it usually does, saying only that sales are expected to “continue to decline”. Adjusted EBITDA for the third quarter should be between $ 65 million and $ 70 million.

    The company says it “focuses solely on execution and managing spend efficiently”. Wish has scaled back its marketing efforts, which will result in “minimal” new buyer conversion.

    Investors need to be patient with the turnaround, as Wish expects its strategies to add to operating performance only in the second half of 2022, likely to begin in the fourth quarter.

    After disappointing quarterly results, ContextLogic received at least 5 downgrades from Wall Street analysts.

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    Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Millennial Money is part of The Motley Fool Network. Millennial Money has a disclosure policy.


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