ContextLogic (WISH) stock was under pressure on Monday, falling 9.4% to close at $4.85.
Despite being one of the most popular mobile shopping applications, with over 90 million monthly active users, the company has struggled to get investor love after reporting dismal second-quarter earnings on August 12.
It was disappointing for investors to see that total revenues declined 6% on a year-over-year basis. Furthermore, the net loss grew considerably, to $111 from $11 in the year-ago quarter.
As a result of the company’s poor performance, the stock price dropped almost 20% after the earnings release.
So far this year, ContextLogic stock has lagged the broader markets. Its stock is down about 68% over the past six months and is down 75% on a year-to-date basis.
Why the Downfall?
The recent drop in ContextLogic’s share price was partially prompted by analyst Jason Helfstein from Oppenheimer, when he downgraded his rating on the stock.
Helfstein pulled down the rating on ContextLogic’s stock to Sell from Hold and set a price target of $4.00. This implies 17.5% downside potential to current levels.
The five-star analyst predicts that the company is facing a “perfect storm of negative challenges” over the coming months. He remained concerned about the rapidly rising shipping costs and a decline in user retention rates. Furthermore, he stated that “with ad budgets shifting to Android, digital ad costs have remained elevated throughout 3Q, impacting customer acquisition/retention.”
Investors’ sentiment remains weak on ContextLogic, owing to a decrease in active buyer numbers, increasing competition from physical shops, and higher digital advertising costs, among other factors.
Notably, TipRanks’ Stock Investors tool indicates that investors currently have a Very Negative outlook on ContextLogic stock, with 4.7% of investors who hold portfolios on TipRanks decreasing their exposure over the past 30 days.
Wall Street’s Take
On TipRanks, ContextLogic stock has an analyst rating consensus of Hold, based on 2 Buys, 5 Holds, and 3 Sells.
As for the price targets, the average WISH price target of $9.17 implies 89.1% upside potential to current levels.
Disclosure: On the date of publication, Shalu Saraf had no position in any of the companies discussed 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, and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices or performance.