ContextLogic (NYSE: WISH) stock is trading higher in premarkets today after reporting mixed earnings for the third quarter of 2022. The stock is however languishing near its all-time lows amid the sharp sell-off.
WISH reported revenues of $125 million in the third quarter of 2022. The revenues fell 66% YoY but were slightly ahead of estimates. The company’s core marketplace revenues fell 78% YoY to $40 million. Its ProductBoost revenues came in at $11 million—70% lower than the corresponding quarter last year. Its Logistics revenues also fell 50% YoY to $74 million.
WISH’s net losses also widened to $124 million in the quarter, which is nearly twice the $64 million that it posted in the third quarter of 2021. The company’s operating performance has deteriorated since it went public in 2020.
WISH’s active user count has also dwindled over the last two years which is weighing heavy on the earnings. One succor in WISH’s Q3 2022 earnings was the free cash flows. While it still reported negative free cash flows of $100 million in the quarter, it narrowed significantly from the $344 million that it reported in the corresponding quarter last year.
WISH had total cash and cash equivalents of $837 million at the end of September and does not have any debt on the balance sheet. However, its market cap is only around $423 million, which is around half its cash. Some traders see the negative enterprise value as a sign of undervaluation. We have a list of stocks that seem undervalued.
WISH Stock Rises After Q3 Earnings
WISH has a negative enterprise value which is quite uncommon. However, the company’s dismal financials explain the anomaly. Its revenues are only a fraction of what they were at the time of the IPO. It has been posting losses and burning cash while there has been an exodus of users from the platform.
The company had 24 million MAUs in the third quarter which is only about a fourth of what it had at the time of the IPO.
There have been top-level exits at the company. Its founder and CEO Piotr Szulczewski, and CFO Rajat Bahri quit the company within months of the IPO. The turmoil did not end there and Vijay Talwar, who replaced Szulczewski last year, quit in September this year after only seven months.
WISH Expects to Post a Loss in Q4 Also
Joe Yan, who is WISH’s interim CEO currently tried to put a brave face after the earnings release. In his prepared remarks, Yan said, “The entire Wish team continued to execute on our foundational pillars during the third quarter.”
He added, “With our business transformation underway, we are beginning to see positive operational results, including a sequential quarterly increase in order volume, declines in refund rates and customer order cancellations, and on-time delivery rate of approximately 92%.”
WISH expects to post a negative adjusted EBITDA of between $90-$110 million in the fourth quarter also. Notably, WISH went public in late 2020 and priced the IPO at $24. It had a tepid listing but rose above $31 in February 2021. The stock was once quite popular among meme stock traders.
However, meme stocks have also plummeted amid the market turmoil. Things have been tough for perennially loss-making companies like WISH and the slowing economy and rising interest rates are only compounding their problems.
Penny Stocks Have Plummeted
WISH stock trades below $1. It is a penny stock and is in non-compliance with Nasdaq listing requirements. During the earnings call, the company said that on October 28, it received a letter from Nasdaq as the stock price has fallen below $1. The company has 180 days to be compliant with the rules.
It said, “The management team will be considering a number of alternatives, including the possibility of reverse stock split to bring the company back into compliance with Nasdaq listing requirement.” A reverse stock split looks quite likey though. Usually, stocks fall when companies announce a reverse stock split.
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