Wish Stock Price is Down 4% – is now a good time to Buy Wish Stock?

The price of ContextLogic stock (WISH), the parent company of the popular e-commerce platform Wish, is down 4% this morning at around $10.8 per share as the stock’s latest positive momentum seems to be fading after the two pronounced jumps that the share price experienced last week.

Up until today, the value of WISH shares has nearly halved since its first trading day closing price of $20 per share while it is down more than 67% from its late January intraday high of $32.9 per share.

Could this latest wave of negative momentum be presenting an opportunity to get your hands on a hot e-commerce stock at a more decent valuation?

Join me in the following analysis of WISH stock to take a closer look at the business’ fundamentals and the stock’s current technical setup to see if there are merits to believe that WISH is poised to reverse its recent downtrend.

Wish stock – technical analysis

Bad news for WISH seem to have started back in the early days of 2021 as the progressive rollout of vaccines around the world threatened to remove the tailwind that internet stocks have been experiencing as a result of lockdown measures.

In consequence, the stock had been posting a series of lower highs and lower lows that ended up forming a downward price channel for WISH, at least until last Tuesday when the stock jumped to break this channel on the back of increased interest from retail traders who frequent the popular Reddit message board WallStreetBets.

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As with other stocks like Clover Health (CLOV) and GameStop (GME), the main objective of WSB traders was to pump the stock price to prompt a short-squeeze on WISH even though short interest is not as high as one might think since it currently stands at 6.6% of the stock’s total float according to data from FinViz.

Based on that number and the stock’s average trading volume of 5 to 10 million shares per day, it would take only 2 to 5 days to cover a short position without affecting the price of WISH that much.

However, on Tuesday and Wednesday, daily volumes climbed 25 to 30 times above their average range with more than 540 million shares exchanging hands during these two days, possibly as brokers were forced to buy WISH due to increased ATM and near-ATM derivatives being bought by traders who expected a sustained rise in the price of the shares.

Data from meme stock tracking website Swaggy Stocks shows that comments and sentiment toward WISH have been muted since the volatile June 9 session, possibly since the price closed 9% lower.

Meanwhile, today’s 4% plunge is threatening to plug the share price back into the downtrend seen before the WSB-led pump and the $10 level remains the key support to watch as a decline below this threshold could prompt a more pronounced downturn for the stock shortly.

Wish stock – fundamental analysis

From a fundamental perspective, WISH is being valued at roughly 1.5 times the stock’s forecasted 2021 sales after deducting the $1.6 billion in cash and equivalents that the company had by the end of the first quarter of its 2021 fiscal year from the current market capitalization of the stock.

Perhaps the most worrying factor about WISH’s fundamentals is that the company continues to lose money at the same pace as it had back when it sold around $400 million even though sales have advanced to $2.5 billion.

Meanwhile, user base growth has been slowing down progressively, which means that the company’s marketing efforts are becoming less effective in attracting more people toward its platform.

In summary, the fundamental situation for WISH is a bit mixed. However, the stock seems to be a buy at current levels due to its depressed forward price-to-sales multiple. That said, the slow down in user growth despite the firm’s millionaire marketing budget is quite concerning and investors should keep an eye on Wish’s ability to keep growing its user base at a rate of 10% or higher in the following quarters.

This bullish view seems to be shared by most Wall Street analysts, as 9 out of the 11 firms covering the stock hold a bullish rating for WISH according to data from Seeking Alpha, with the consensus price target currently sitting at $18.7 for a potential 73% upside if such a target is hit.

I believe a drop below the $10 level would present itself as a buying opportunity on the back of overly depressed fundamental metrics unless there is a material change in the company’s ability to keep attracting new users toward its platform.

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