[ad_1]
The post ContextLogic Stock Plunges on Weak Q2 Results appeared first on Millennial Money.
Shares of ContextLogic (NASDAQ: WISH), which operates the Wish e-commerce platform, plunged on Friday after the company reported lackluster second quarter earnings.
The company has become one of several prominent “meme stocks” that have gained popularity among retail investors, particularly on Reddit’s WallStreetBets subreddit. That has created considerable volatility in recent months.
As of 1:20 p.m. EDT, ContextLogic stock was down by 18%.
Wishing for better results
Revenue in the second quarter declined 6% to $656 million, missing the consensus estimate of $722.9 million. That resulted in a net loss of $111 million, or $0.18 per share, while Wall Street analysts were expecting a net loss per share of just $0.13. Wish acknowledged that engagement and demand fell short of expectations.
“Wish has begun executing on initiatives designed to enhance the user experience and increase engagement on the Wish app following second-quarter results that did not meet our expectations,” CEO Piotr Szulczewski conceded. “Our goal is to ensure that users love coming to Wish often for an entertaining shopping experience where they find unique products at affordable prices.”
In a letter to shareholders, Szulczewski said that “demand slowed due to a number of headwinds.” Vaccination rates have been increasing in numerous regions, leading to declining user activity on Wish.
The company disclosed that it experienced a 13% drop in app installs and a 15% decline in average time spent on the platform in the second quarter on a sequential basis.
Combined with declining engagement, costs are on the rise. Specifically, digital advertising expenses, which have been Wish’s primary method of user acquisition, have risen faster than expected.
Apple’s (NASDAQ: AAPL) recent privacy changes around ID for Advertisers (IDFA) has upended the mobile advertising industry, pushing many advertisers to shift spending on Android. As Android is the preferred platform for “the majority” of Wish users, the subsequent bidding among advertisers pushed up ad prices.
In response to the combination of headwinds, Wish plans to enhance product quality and selection, improve the shopping experience, and bolster the performance of the app.
The turnaround will take time
Wish declined to provide revenue guidance for the third quarter like it typically does, merely saying that sales are expected to “decline further.” Adjusted EBITDA in the third quarter should be negative $65 million to negative $70 million.
The company says that it is “focused squarely on execution and efficient expense management.” Wish has reduced its marketing efforts, which it notes will lead to “minimal” new buyer conversion.
Investors will need to be patient with the turnaround, as Wish does not expect its strategies to start contributing to operating performance until the second half of 2022. The company intends to be disciplined with cash management until it can start to improve adjusted EBITDA, which is expected to begin in the fourth quarter.
Following the disappointing quarterly results, ContextLogic received at least 5 downgrades from Wall Street analysts.
The post ContextLogic Stock Plunges on Weak Q2 Results appeared first on Millennial Money.
[ad_2]
Source link