Connect with us

Stocks

Contextlogic Is a Falling Knife You Should Not Touch

Source: Ralf Liebhold / Shutterstock.com
ContextLogic (NASDAQ:WISH) is one of the most volatile stocks and has been falling consistently since its initial public offering (IPO). However, the stock has recently started going up. The price of WI…

Source: Ralf Liebhold / Shutterstock.com

ContextLogic (NASDAQ:WISH) is one of the most volatile stocks and has been falling consistently since its initial public offering (IPO). However, the stock has recently started going up. The price of WISH stock has gone up 24% in two weeks, and it looks like the stock is finally bottoming out.

Advertisement

However, I believe that investors should look at the bigger picture. WISH stock is still down more than 88% from its all-time high and has had multiple short-term recoveries while trending downwards.

Of course, this could indeed be a reversal to the upside. However, looking at the broader economy makes such a scenario highly unlikely. The Federal Reserve currently plans multiple rate hikes, some of which could be higher than the market anticipates. These hikes will drag down fragile stocks, such as WISH.

Advertisement

What’s to Be Excited About With WISH Stock?

The company isn’t financially strong either, nor is it heading towards a recovery. The quarterly net income of ContextLogic hasn’t managed to come out of the negative territory, and its revenue has been falling at a record pace.

Advertisement
  • 7 Beaten-Down Growth Stocks That Look Like Big Bargains Right Now

The lack of improvement is especially noticeable when you look at the company’s revenue statistics. For the past four quarters, the revenue has only accelerated its downtrend. This quarter, year-on-year quarterly growth declined to -75.52%. Even worse, the quarterly net profit margin of ContextLogic is down by 91.5% to -31.75% YoY.

If the current trend continues, an improvement in its profitability is unlikely. Moreover, the company will have to heavily limit its expansion to reduce its losses.

Advertisement

Judging by the company’s finances, I would avoid investing in WISH stock. The company is on a downwards trend and the current state of the economy will only make it worse. Unless the company manages to present significant surprises, the profitability of WISH is likely to disappoint in the long term.

On the date of publication, Omor Ibne Ehsan did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Advertisement

More From InvestorPlace

  • Stock Prodigy Who Found NIO at $2… Says Buy THIS
  • It doesn’t matter if you have $500 in savings or $5 million. Do this now.
  • Get in Now on Tiny $3 ‘Forever Battery’ Stock

The post Contextlogic Is a Falling Knife You Should Not Touch appeared first on InvestorPlace.

InvestorPlace| InvestorPlace

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *