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Is there an end in sight to the ContextLogic collapse?

Although ContextLogic shares fell another 14% this week, analysts remain upbeat on the stock.

Source: Bloomberg
  • ContextLogic Inc (NASDAQ: WISH) shares are down by another 14% this week, closing just above US$10 on Thursday (15 July 2021)
  • The parent company of shopping app WISH is facing a securities class action, whose lead plaintiff deadline is this week
  • Despite the stock's current bearishness, analysts continue to rate it a 'buy'
  • Bucking the trend are Evercore analysts, who downgraded their call to 'in line' and price target to US$13
  • Interested to trade ContextLogic shares at just a fraction of the cost? Open an account with us today to get started

WISH share price: why are analysts still bullish?

ContextLogic shares plunged by another 14% this week, ahead of a 16 July lead plaintiff deadline for a securities class action against the company.

The stock is trading 58% below its initial public offering (IPO) price of US$24, and is down 48% year to date.

Despite WISH’s current bearishness, the latest analyst sentiments published by MarketBeat show a consensus rating of ‘buy’ and price target of US$22.83 on the stock.

The price target equates to a 126.3% upside potential from its last traded price of US$10.09 on Thursday.

Earlier this month, however, Evercore ISI analysts downgraded their call on ContextLogic to ‘in line’ from ‘outperform’, alongside a reduced price target of US$13 (from US$17 previously), following the departure of the company's Chief Financial Officer Rajat Bahri.

The analysts noted that Bahri's exit is a cause for concern, especially considering the e-commerce company's ‘rocky public debut’.

Why is a lawsuit being filed against ContextLogic?

A securities class action is currently pending, in which a group of investors who purchased shares in the company's December 2020 IPO or on the open market are alleging that ContextLogic's IPO registration documents ‘materially overstated’ the company's business metrics and financial prospects.

According to Hagens Berman - one of the law firms representing WISH investors, ContextLogic’s IPO registration documents had claimed that its then 108 million monthly active users (MAUs) was a key driver of revenue growth.

However, the law firm alleges that by the time of its December 2020 IPO, ContextLogic's MAUs had declined materially.

On 08 March 2021, the parent company of the WISH platform disclosed that its MAUs had ‘declined 10% year-on-year during Q4 to 104 million’ in its 4Q 2020 and full-year results.

IPO registration documents also ‘failed to disclose this known trend reasonably likely to materially impact ContextLogic's profitability’, Hagens Berman added.

What’s your take on ContextLogic shares? Do you think it will continue to fall? Take your position today.

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This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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