The meme shares on the Reddit forum are typically weak, slow-growing, or losing companies. But in this selection one has escaped with a totally different situation, ContextLogic Rg-A according to Jeremy Bowman in The Motley Fool.
The recent OPI ContextLogic, better known as Wish, the mobile e-commerce platform operating, a 70% from the beginning of June with an extraordinarily high volume. In the spring, only around 5 million shares changed hands every day, but on June 21, the daily volume reached the 335 millions.
Unlike most meme actions you are growing rapidly and has a strong valuation. Is the WallStreetBets crowd on something here?
What is Contextlogic’s business?
Founded in 2010 and with strong growth, it reported growth of 34% revenue in 2020 to $ 2.5 billion. In a crowded e-commerce field, the company aims to distinguish itself by democratizing the mobile commerce with an entertainment platform, personalized and based on discovery. The business model appears to borrow from traditional retailers like Five Below, offering a whimsical shopping experience on heavily discounted items, among other products. It mimics social commerce platforms like Pinduoduo by trying to make shopping fun by offering giveaways and small prizes for interacting with the platform.
The company is also developing complementary businesses as the Logistics, getting stronger in the same way that Amazon has. In the first trimester, logistics revenue they fired in a 338% to $ 245 million, which raised the general income in a 75% to $ 772 million. The company is also innovating with programs such as Wish Local, which allows small, independent stores to upload their entire inventory to the Wish website. This has allowed it to capitalize on the large physical merchant base.
However, the company is also trading at a loss, since it invests in long-term growth.
Should you buy Wish stock?
ContextLogic lacks many of the typical characteristics of a meme action, but it does have a few things in common with the more popular actions on WallStreetBets. Wish has attracted the attention of short sellers (16% of their float was shorted at the end of May), and its lackluster performance in the first few months after its IPO likely attracted the attention of bargain-seeking retail investors that populate WallStreetBets.
Compared to most growth stocks, it appears to be very reasonably priced with a price / sales ratio of around 3, on par with other e-commerce companies like Stitch Fix, Wayfair, and even Amazon.
The big question for the next few years: will the company be able to make a profit? Your current business model requires aggressive spending on gifts and temptations for new customers, and it may be difficult to cut back on those expenses once customers are used to those kinds of rewards.
The business model does not yet appear proven, and its claim that scale and data science are essential for your competitive advantage It might not be accurate, as the company competes with Amazon, which is a master of both scale and data science.
“For investors looking for meme stocks, it could do worse than Wish. But given the challenges it faces in becoming profitable and differentiating itself in e-commerce, it looks like the stock is looking better from the sidelines for now. In the short term, it seems that the volatility of WallStreetBets will continue ”, concludes Bowman.