Wish Stock Up 12% in October – Time to Buy WISH Stock?

The price of Wish stock has recovered some of its lost territory in October following the pronounced decline that it suffered in the two preceding months after the management made some downbeat comments about the firm’s outlook.

Shares of the e-commerce platform have advanced nearly 12% so far since the month started, primarily as a result of a pronounced 14.5% single-day uptick they experienced yesterday.

No major developments were behind this significant jump but it is worth noting that interest from retail traders has increased lately as indicated by data from Swaggy Stocks.

Can this latest uptick mark the beginning of a trend reversal for Wish stock or are retail traders doomed to fail at pushing the stock higher in the following weeks? In the following article, I’ll be assessing the price action and fundamentals of WISH stock to outline plausible scenarios for the future.

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Wish Stock – Technical Analysis

Since Wish has been a usual target of the retail crowd, it is important to assess the influence that this group could have in its price action. According to data from Swaggy Stocks, comment volume on the popular Reddit messaging board has been surging in the past three days moving from accounting for 3% of total posts to as much as 10% this morning.

Wish’s short float, currently standing at 11% according to data from Finviz, is a factor that can exacerbate any pronounced upward price movements in the stock as short-sellers may rush to cover their positions if the price suddenly goes up – a situation that could cause a short-squeeze of the likes seen earlier this year.

However, since Wish’s volumes have gone up so much, it is now easier to cover these shorts without necessarily tipping the market. Around 50.7 million shares are currently being borrowed by short-sellers compared to an average of 36 million shares traded daily. This means that it would take around 2 to 3 days for them to cover their positions without impacting the stock price that much.

For now, the chart shows that the price stopped right at the 50-day simple moving average yesterday and this is an important threshold to overcome if bulls want to push Wish shares higher in the following days.

Moreover, if a break above this trend line does occur, a horizontal resistance would be found at around $7.5 per share. Even if the price does not break that level, a tag of this threshold, which is in confluence with the price gap left behind during the August sell-off, would result in an attractive 23% advance for Wish stock.

All things considered, if a break of the 50-day SMA occurs, the outlook for the stock would be bullish in the very near term.

Wish Stock – Fundamental Analysis

In a previous article about Wish stock, I highlighted that the decline that took place during August was a bit exaggerated as it pushed the firm’s valuation metrics to levels that are just hard to justify.

Wish’s track record of revenue growth is particularly appealing as the company has moved from reporting $1.1 billion in revenue to $2.5 billion from 2017 to 2020 at a compounded annual growth rate of 31.5%.

During that same period, the number of monthly active users (MAUs) for the company has grown from 49 million to 107 million while the company has no long-term debt.

That said, Wish’s net losses have been accelerating and its EBITDA remains negative as well.

At its current market capitalization of $3.82 billion, the firm is now trading at only 2 times its forecasted sales for the next twelve months. Moving forward, the management will have to deal with tougher comps as a result of the strong sales the firm reported during the pandemic.

However, at this current valuation, considering Wish’s strong user numbers and robust balance sheet, the firm is a perfect target for an acquisition and, in that scenario, long-term investors stand to benefit.

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