Wish stock has left many companies wishing that they have not heard about it. It has got the worst name because of the bad circumstances. It belongs to the company ContextLogic Inc. in San Francisco, United States. Also, it is offering a personalized shopping experience for each customer. The firm began in 2020 and it seemed to have better prospects for the future. It was growing at a rapid pace but it had a unique model. But the reputation of the company dimmed in 2021. The treasure hunt of the company became plagued with complaints about its bad product quality.
Then the revenue of the firm also decreased rapidly. Because of this, the CEO of the company announced his departure that year. Is there any room for WISH stock to get better again after falling more than 80%? Have a look at the financial situation of the company here.
Details about Wish
Wish’s founder is Piotr Szulczewski. Formerly he was working as a Google engineer. Wish was better known as a software company – ContextLogic. In 2010 it received $1.7 million in investments and Yelp CEO Jeremy Stoppelman was also part of it. In Szulczewski invited his college friend Danny Zhang to relaunch the company as Wish.
Wish was created as a platform that allowed shoppers to make wish lists of the products they like and find the matching merchants. They also got revenues with the Pay-per-click model ads on Facebook.
In 2013 he met Hans Tung an investor of the GGV Capital in Menlo Park, California. It had a large number of sales in Florida, Texas and the Midwest. Then Wish became a popular eCommerce site as it asked merchants to sell their products directly on the site. Then Wish took a portion of each sale.
The Wish marketplace is accessible through the Wish.com website or by a mobile application. It grew into a great site and in 2017 became the most downloaded e-commerce application in the US. Then it signed a multi-year partnership with the Los Angeles Lakers from NBA. In 2018 it conducted the World Cup campaign. In 2018 it became the most downloaded eCommerce app. It had revenue of $1.9 billion.
After that, the platform was accused many times of selling counterfeit items. It became a common concern and affected the reputation of the company. Many customers complained about the lack of customer service. It is also possible in Wish to get goods not legal in a country. So it also became a matter of concern.
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The burn rate and balance sheet of ContextLogic
Now it is difficult for anyone to be optimistic about the operations of ContextLogic. Have a closer look at the important factors about it. At the moment ContextLogic has $1.2 billion of cash. It also has short-term equivalents on its balance sheet. When looking at the first glance it appears good but it is not. You have to know that the firm has $500 million of current liabilities. Hence the usable funds are below the $1.2 billion figure. Under normal circumstances, not all funds are available to be spent. It is of utmost importance for ContextLogic to remain in compliance and get hold of its balance of $350 million of cash. Some companies do trip debt companies but it is best to be prevented at all costs.
So the company had $700 million or $800 million of excess liquidity during the holiday season. But it did well in Q4 because of the holiday shopping. But the company’s cash burn is back. It is entering 2022 in a bad situation.
In the recent results, ContextLogic is generating operating costs of $100 million per quarter. It means $400 million of annual losses. As the company is having $700 million of available funds in 2022, it has to stay above $350 million to handle its debt covenants. It has only one year of liquidity left to get funds. But to the benefit of Wish stock, its cost reduction plan is working. It has lost $64 million in the last quarter. It has more time for a turnaround plan.
ContextLogic’s road to redemption
It seems ContextLogic should have funds to enter 2022 confidently. Then only it can also survive 2023 without too much trouble. It must keep a $0 stock price out for a while. But is there anything that can help the company to get back on the right track?
The most important decision facing the company is the CEO. But this issue is also sorted out. The CEO of the company Piotr Szulczewski stepped out of his position in 2021. He was also the founder of the company. Then on January 31, 2022, Vijay Talwar became the CEO of the company. Now he is looking after all the aspects of the company with the guidance of members of the board.
Is there hope for ContextLogic?
When looking at the short-term everything seems dim for ContextLogic. The company is showing the public that it is taking all the steps to become better. It is trying to stop the bleeding which means that it is addressing the high operational expenses and issues related to low-quality products.
The new CEO of the company Vijay Talwar has the burden of the daunting task of stabilizing margins and improving alternative market penetration strategies in the US and Europe. These strategies are the ways that give hope for the company’s betterment.
Wish Stock is also taking many initiatives to restart its growth. It is already putting it into practice. It is lowering its marketing expenses and also putting effort into improving the good’s quality. Plus, it is offering a new “invite-only” merchant selection process which is going to offer positive results for the Wish platform.
The shares of ContextLogic are trading at lower multiples than last year. Currently, it is focused on long term investment stocks that hit $2 levels. It is a good plan as the eCommerce sales are expected to grow 50% in the next four years. This industry growth may help boost the revival plans of Wish Stock.
Wish Stock is getting worse but it is also trying to get better. The company is following various strategies to find solid ground.