Two years ago, at 16 December 2020 , the shares of the american enterprise Contextlogic.Inc were debuted on US Nasdaq. It’s time to check where the company is now and if is it still the occasion to invest.
- Contextlogic.Inc was founded in 2010 and it is is the owner of e-commerce platform named Wish.com;
- In 2016, the founder of company rejected Jeff Bezos’s offer to resell the company;
- Enterprise has been the subject of many articles due to a drastic drop in the value of its shares at the beginning of Q2 2021;
A few words about the company
Contextlogic Inc. is the american technology company founded on July 4, 2010 in San Franciso by Peter Szulczewski – ex-Google employees. Contextlogic’s mission is to support merchants in reaching customers, as well as enable users to personalize shopping and find the products.
The inspiration for its creation were founder’ experience and private observations that concern market and customers behavior during his stay in South Korea. Since 2011, Peter Szulczewski has been developing it together with Danny Zhang.
The main activity of the Contextlogic.Inc focus on providing e-commerce services for merchandisers and customer by connecting them via marketplace called Wish that is available as the mobile app. The first one, who are selling their goods through it, receive extensive support from the company. Beginning from promoting their products, through processing payments up to logistics issues. Whereas their potential clients get access to a huge variety of nonmark discounted goods. It includes products from such categories as clothes, electronics, gadgets, household items and more.
The mobile app Wish is integrated with payment service providers that are responsible for handling payments. Contextlogic.Inc does not stok the products themselves.
Currently, Wish platform is available for customers in more than 60 countries around the world. According to the data’ entity (December 2022), mobile app Wish has approximately 250 thousands registered merchants. Through it, the daily number of products sold is 900 thousand. The number of active users during the month is 44 milion.
The countries, in which mobile app Wish is avaliable
But how does the history look like before ?
Two years later, in 2009, Peter decided to left Google and start writing the code for future system that aim was to predict customers’ interests on the basis of their behavior in the internet. At that time he had sufficient savings that allowed him to focus only on creating new platform. After six months, the new system that was called Contextlogic was ready.
In May 2011, at the invitation of Peter, Danny Zhang joined the project as its co-founder. Initially, obtained results did not satisfy both owners. In connection with this, they decided to look more preciously at the market and the mechanisms used by two big players, i.e. Yahoo and Google.
What is more, Peter noticed characteristic feature for the online shopping market. Well, all issues that were available at that time via the Interent was moving from desktop computers to smartphones. And that was the niche that Contextlogic.Inc could fulfill. One of their competitors, i.e. Amazon, did not work then well on the smartphones.
At the same year, Facebook submitted a proposal to integrate the Contextlogic system with its own advertising system or other software that could evaluate articles and posts in the main channel of the social networking site. The transaction amount was $20 million. Unfortunately for Facebook, Peter Szulczewski declined the offer and, together with Danny Zhang, started working on the predecessor of the current platform Wish. It was Wishmewall.com, whose the rule of operation was exactly what the name of the platform means, i.e. creating a wish list. The users could create a list of products that they wish to have, and system on the basis of collected data was selecting the goods from the other website. In fact, Contextlogic.Inc wasn’t selling none of these products. It only join the demand with the supply.
In that way, the number of users’ Wishmewall.com was growing steadily. It allowed Peter and Danny to send e-mails to merchandisers that are present at the other platform (e.g. Amazon, eBay). Contextlogic.Inc was offering them a group of customers that were ready to purchase, but on the condition of obtaining a lower price, i.e. from 10% to 20%. In order to maintain the pace of app development, Danny and Peter decided to give commission up.
In 2013, the founders of Contextlogic met with investor from GGV Capital in Menlo Park. It was Hans Tung. He was impressed by the amount of contract that the entity had signed with companies from China. What is worth to underline, none of founders had not been in Asia before. What is more, future investor noticed also that larger number of orders came from Florida, Texas or Midwest rather than from richer states like New York or California.
Soon after that, Contextlogic.Inc got $50 milion, and Wishmewall.com became the e-commerce platform named Wish where merchants can list their products directly on the website in exchange of a given percentage of the value of transaction.
In 2016, Contextlogic.Inc and its mobile app Wish was noticed by one of the executive from Amazon that was close to the founder of Amazon. He had arranged the meeting between Peter and Jeff Bezos to discuss the terms of taking over the company. Although, both gentlemen met, the deal fell through. Szulczewski had warned Bezos’ executive assistant of no intention to sell the business before the meeting.
In 2017, Wish signed a multi-year partnership with NBA’s basketball team, i.e. Los Angeles Lakers. What is more, in that year mobile app Wish was the most download e-commerce mobile application in the United States.
Next year, in 2018, Wish conducted a World Cup campaign, whose face were such stars as Neymar, Paul Pogo, Tim Howard, Gareth Bale, Robin van Persie, Claudio Bravo and also Gianluigi Buffon. It also had the largest number of downloads worldwide. Contextlogic.Inc doubled then its revenues, i.e. from $0.8 billion to $1.9 billion.
In 2019, Wish became the third-biggest e-commerce marketplace in the United States by sales. In August 2019, its owner received another one round of financing as part of the issue of series H shares. The investor was JD.com.Inc – the Chinese e-commerce company and one of two massive B2C online retailers in China (in terms of transaction volume and revenue). The value of Contextlogic.Inc was raised to $11,2 billion.
In December 2020 Contextlogic.Inc had successful debut (via IPO) on the american stock exchange market, i.e. Nasdaq.
Next year, in November 2021, Wish was delisted from Google’s search results and from Google’s French App Store. This was a result of an order issued by General Directorate For Competition Policy, Consumer Affairs and Fraud Control in France. In the relevant statement, the authority justified its decision by the lack of withdrawal by the platform of products considered unsafe in a manner satisfactory to the authority.
At the same time, Peter Szulczewski resigned as CEO. In January 2022, Vijay Talwar replaced him in this position. In September 2022, he has departed the company as CEO and from the Board of Directors, effective immediately. Until permanent CEO is hired, Joe Yan (Operating Partner at GGV Capital) will act as interim CEO.
Ok, so what is Wish today and what does it offer?
Wish.com is the global e-commerce platform that is available as a mobile app and through web browser. It offers a wide range of services tailored to the needs of the customers as well as the merchandisers around the world whose the aim is to support them during the transaction.
Wish has been designed with a user experience in mind that is mobile-first, discovery-based, deeply-personalized and entertaining.
How does it work?
Unlike to most e-commerce platform, which are available on the market, the principal of using Wish platform is based on scrolling the screen on mobile app or website by the users to discover the offered products that are personalized to each of them. According to the lates data, over 70% of purchases on the platform are made without using a search query.
What are these products?
These are nonmark goods that are distinguished by low price compared to their branded counterparts.The portfolio of products offered through the platform includes categories such as: beauty, fashion, gadgets, household items, electronics, toys, pets products or even cosmetics.
Currently, most of the products offered come from Chinese merchants that are characterized by an increase in the quality of the goods offered at competitive prices.
What about the technology that was used?
The technology, which was used to create Wish, bases on data science.
Contextlogic.Inc is one of the few technology companies with a big advantage in terms of data. This is due to the actions taken in the past that allowed the creators of the platform to build their own set of data about the behavior and transactions of both parties (i.e. sellers and buyers). More than 10 years of historical data, combined with an algorithm, allows for continuous optimization of the displayed results and the functionality of the platform.
According to the company’s representatives, the data analysis capabilities combined with the platform solution allows their founders to develop its business and drive each of its aspects.
Types of data on which the operation of the Wish platform is based
Below are examples of using data science to run a business:
- User Acquisition
- Based on the collected data, the platform decides what and when to show to whom and what acquisition channels to use to maintain the highest possible return on marketing and conversion expenditures.
- Lifetime Value Maximization
- The platform uses data science to maximize the lifetime value of users as well as to optimize the initial investments related to user acquisition. This includes not only evaluating marketing spending, but also selecting marketing channels and strategies for user acquisition and re-engagement.
- Dynamic Pricing
- The collected data is used by the platform to measure the demand for goods offered through it. They allow it to adjust the price ceiling of the displayed users’ offers due to their price sensitivity as well as to optimize the margin at the highest possible level.
- User Personalization
- The algorithms developed by the company allow to process the collected data on the behavior of users on the platform. This allows Wish to adjust the displayed content to individual users’ preferences.
Wish from the consumer’perspective
As it was mentioned earlier, Wish was designed to re-invented the online shopping experience for consumers. They were supposed to become, above all, entertainment based on discovering personalized offer of products on mobile.
How did entity achieve it?
Contextlogic.Inc built the e-commerce platform primarily for mobile devices. Therefore, what can be noticed right after entering the applications, the displayed content is characterized by a large number of various types of images.
Its creators used elements of gamification as well as some of the functionalities of social platforms to increase the length and frequency of user sessions.
In addition, (according to the principle discovery-based) Wish has been designed in such a way as to provide users with easy navigation through a wide selection of products, even when they have not fully specified what they want to buy. What is interesting, due to the fact, the system displays a personalized group of products, there is no way for users to receive the same range of goods.
So, what is the value proposition to Wish users (consumers)?
Contectlogic.Inc offers its users (consumers) through the platform and the services provided within it the following values:
- Affordable
- The goods offered through the platform are mostly unbranded products, the price of which can be reduced by up to 85%. This makes them products easily accessible to the majority of the population.
- Accessible
- Wish is an e-commerce platform available from a smartphone without any subscriptions directed towards its users.
- Everywhere
- The functionality of the platform is adapted to the country from which the user uses it. This includes e.g. country-specific payment method. In addition, the application is available in 40 different languages
Wish from the sellers” perspective
As with consumers, Wish was also designed with the needs and capabilities of sellers in mind.
The main assumption in this case was to create an easily-accessible and economical e-commerce platform that will support them in starting their online business and increase their sales volumes (and thus also revenues).
How?
The platform offers access to a large customers’ base and a set of specific services related to online sales. It includes such areas like demand generation, analytic things, logistics and business operations.
So, what is the value proposition to Wish users (merchants)?
Wish offers its users (merchandisers) a wide range of value depending on the given area:
Demand Generation
Wish provides demand generation through special programs. One of them is a network of local suppliers whose products and services are displayed to users from all over the world, which has positive impact on their results of sales.
Another solution offered by the platform is a native advertising tool called „ProductBoost„, which uses data analytics to optimize ad placement. It allows merchants to target ads to users who are more likely to make a purchase, and thus maximize their return on ad spend.
Data Inteligence
The Wish App provides merchandisers with analytics insights through a dedicated dashboard. It’s called Wish Merchant Dashboard. Its purpose is to support sellers in improving their results. This includes among others overall impressions, sales volume, product range, shipping and returns needs.
In addition, based on the collected data, the application system displays sellers’ products to users with the highest probability of making a purchase.
Logistic
As part of the Wish application, sellers also get access to logistics programs developed by the company. Their aim is to support them in issue connected with constantly changing global postal regulations and rising shipping costs by providing them a set of reliable cross-border logistics solutions at competitive costs.
Moreover, Wish has the Wish Local Pickup affiliate program that allows retailers to deliver products purchased by customers by shipping them to partner collection points. As of today, the application has over 50,000 such points located near the place of residence of its users around the world.
Business Operations
As part of the platform, Contextlogic.Inc provides users, who are sellers, with a full set of tools to improve their online business activities. They also receive access to educational materials on their use.
In addition, Wish offers its merchandisers support in compliance with international laws and regulations, payment processing and customer service.
Value Proposition to Wish Users
Debut on Nasdaq and unexpected drop in the share price
On December 16, 2020, Contextlogic.Inc shares debuted on Nasdaq (american stock exchange). Although the company managed to sell 46 million series A shares at a price of $24 per share, the share price fell by as much as 16.5% on the first day of trading. Then there was a temporary increase in price around $22 per share, after which one share of the San Francisco-based company was available for purchase at a price of $16.50. At the end of 2020, its price increased to just over $18.
Contextlogic.Inc share price from December 16, 2020 to December 21, 2022
The highest share price was recorded on January 22, 2021, when investors had to pay as much as $32.85 for one Contextlogic.Inc’s share. Unfortunately, it was only a temporary value. On the same day, the company’s share price began to fall. In May of the same year, it reached the level of $7.94 per share, after which it rose for the next month. On June 25, the share price closed at $14.04. Since then, the value of the company’s shares has been steadily declining until today.
Recall that on December 20 of this year, the closing price of the shares was only $0.51.
What happened?
The reasons for such a spectacular decline in the value of shares can be found everywhere. It should be remembered that the share price started to fall in the first quarter of last year. It was a period when the world began to overcome the COVID-19 pandemic prevailing since the end of 2019 and the policy called „stay home” ceased to apply. People began to choose stationary purchases over online. (this was mainly due to the desire to return to interpersonal contacts in reality.)
At that time, all e-commerce platforms and online stores recorded a decrease in users, and thus a decrease in revenues and profits. The exception were the companies that conducted brick-and-mortar sales. However, other players, such as Contextlogic.Inc, have felt this change quite strongly, which is reflected in the company’s financial results.
This unfortunate chain of events caused panic in the stock market, where investors (especially those inexperienced) began to withdraw their funds from shares of technology companies. Owners of competing platforms also suffered from this, but not as much.
Why?
Well, both Amazon and Alibaba Group (owner of the Aliexpress platform) have been on the market much longer than Contextlogic. They have an established position and revenues that allow them to generate profit. Their decrease meant only their lower value, not a loss. In turn, this did not cause as much panic among the then shareholders as in the case of the discussed company.
The situation of the owner of the Wish platform was different, where the decrease in revenue meant even greater losses. BUT, it should be remembered that the company is at the growth stage and in the case of technology companies lack of profits is nothing extraordinary. The more so that looking at the cost structure, the negative financial result was mainly due to marketing costs. And as you know, this is an area that has no upper limit of expenses.
As if that wasn’t enough, an unusual „battle” against the owner of the Wish platform began on the market, where large (and small) information portals predicted the end of Szulczewski’s business.
The icing of „problems” on Contextlogic’s cake was information that came like a thunderbolt from the blue. It concerned an order to remove the Wish application in France from Google search results and from application stores.
All these events, combined with Szulczewski’s resignation from the position of CEO, strengthened the fall in the share price.
Is such a large drop in the Contextlogic.INC stock price justified?
Before anyone says yes, there are a few key aspects that are worth to look at.
The financial results of Contextlogic in the period of time 2015-2020 (before debut).
Since 2015, Contextlogic.Inc’ revenues have steadily increased year by year. The average annual growth rate was 91,41%.
Contextlogic.Inc' revenue in 2015-2020
| wdt_ID | Category | Amount as at December 31, 2015 [in mln] | Amount as at December 31, 2016 [in mln] | Amount as at December 31, 2017 [in mln] | Amount as at December 31, 2018 [in mln] | Amount as at December 31, 2019 [in mln] | Amount as at December 31, 2020 [in mln] |
|---|---|---|---|---|---|---|---|
| 1 | Revenue | 144 | 445 | 1.101 | 1.728 | 1.901 | 2.541 |
| 2 | Cost of revenue | 78 | 131 | 205 | 278 | 443 | 947 |
| 3 | Gross profit | 66 | 314 | 896 | 1.450 | 1.458 | 1.594 |
In 2015, the company’ revenue amounted to $144 million. At that time, the number of monthly active users was 49 million. In 2020, when Contextlogic debuted on the stock exchange, these revenue increased to over $2.5 billion. It was the highest result in the history of the company. The monthly number of active users was then 107 million.
What was the structure of revenue?
Contextlogic.Inc has two main categories of revenue streams that make up the company’s overall revenue. These are Marketplace Revenue and Logistic Revenue.
Contextlogic.Inc' revenue streams and their volumes in 2017-2020
| wdt_ID | Category | Amount as at December 31, 2017 [in mln] | Amount as at December 31, 2018 [in mln] | Amount as at December 31, 2019 [in mln] | Amount as at December 31, 2020 [in mln] |
|---|---|---|---|---|---|
| 1 | Core Marketplace revenue | 1.053 | 1.508 | 1.473 | 1.827 |
| 2 | ProductBoost revenue | 48 | 214 | 291 | 200 |
| 3 | Marketplace revenue [total] | 1.101 | 1.722 | 1.764 | 2.027 |
| 4 | Logistics revenue | 0 | 6 | 137 | 514 |
| 5 | Total revenue | 1.101 | 1.728 | 1.901 | 2.541 |
In 2017-2020, the dominant revenue stream was revenue generated by the platform. It consisted of revenue from the basic activity of the marketplace (margin imposed on the price of the product) and the so-called ProductBoost revenue, i.e. revenue generated from user fees for advertising their products.
As can also be seen, since 2018 Contextlogic.Inc has started to record revenue from logistics activities. At the end of that year, it was only $6 million, but Logistic Revenue’ size continues to grow in subsequent years. At the end of 2020, it was higher than in 2018, and its value was equal to $514 million.
How were operating expenses?
The costs incurred by the company in question are also worth attention. Their level has been increasing over the years under study, but it has not been higher in each year than in the previous one.
Contextlogic.Inc' operating expanses in 2015-2020
| wdt_ID | Category | Amount as at December 31, 2015 [in mln] | Amount as at December 31, 2016 [in mln] | Amount as at December 31, 2017 [in mln] | Amount as at December 31, 2018 [in mln] | Amount as at December 31, 2019 [in mln] | Amount as at December 31, 2020 [in mln] |
|---|---|---|---|---|---|---|---|
| 1 | Total operating expanses | 588 | 455 | 1.043 | 1.673 | 1.602 | 2.225 |
| 2 | Loss from operations | 522 | 141 | 147 | 223 | 144 | 631 |
At the end of 2015, the value of incurred operating expanses were $560 million. In the following year, it decreased, but since the end of 2017 they have been steadily increasing. In 2020, Contextlogic.Inc incurred costs of $2.25 billion. The average growth rate from that year was 50,0%.
What was the structure of operating expanses?
Operating expenses include mainly costs related to sales and marketing, product development as well as general and administrative expenses.
Contextlogic.Inc' operating expanses structure and their amount in 2017-2020
| wdt_ID | Category | Amount as at December 31, 2015 [in mln] | Amount as at December 31, 2016 [in mln] | Amount as at December 31, 2017 [in mln] | Amount as at December 31, 2018 [in mln] | Amount as at December 31, 2019 [in mln] | Amount as at December 31, 2020 [in mln] |
|---|---|---|---|---|---|---|---|
| 1 | Sales and marketing | 560 | 428 | 989 | 1.576 | 1.463 | 1.708 |
| 2 | Product development | 6 | 10 | 28 | 45 | 74 | 222 |
| 3 | General and administartive | 22 | 17 | 26 | 52 | 65 | 295 |
The largest share in the operating expanses incurred by Contextlogic.Inc were recorded for sales and marketing activities. Their average share in the total operating costs during that period was 93,93%. Other costs are product development’ expanses as well as expanses relate to regular business operations. Their values change over time. In the case of first mentioned category of costs, the annual growth rate was 114,37 %. The growth rate for general and administrative expenses was 101,81%
And what was the company’s financial result in 2015-2020?
In the years 2015-2020, the company recorded negative financial results.
Contextlogic.Inc' net loss in 2015-2020
| wdt_ID | Category | Amount as at December 31, 2015 [in mln] | Amount as at December 31, 2016 [in mln] | Amount as at December 31, 2017 [in mln] | Amount as at December 31, 2018 [in mln] | Amount as at December 31, 2019 [in mln] | Amount as at December 31, 2020 [in mln] |
|---|---|---|---|---|---|---|---|
| 1 | Net loss | 537 | 151 | 207 | 208 | 129 | 745 |
At the end of 2015, the company’ net loss was $537 million. In the following years it recorded much lower values. Its rapid growth took place at the end of 2020 (by 478 % compared to the previous year), when the company debuted on the stock exchange. At that time, the company’ net loss at the end of 2020 was $743 million.
The financial results of Contextlogic in 2021 (after debut)
In 2021, the company’s revenues were 17.9% lower than in the previous year. It was equal to $2,085 billion. The number of monthly users dropped to 74 million ( decrease by 30,8%).
Contextlogic.Inc' revenues in 2021
| wdt_ID | Category | Amount as at December 31, 2021 [in mln] | Amount as at December 31, 2020 [in mln] | % change (YoY) |
|---|---|---|---|---|
| 1 | Revenue | 2.085 | 2.541 | -17,94 |
| 2 | Cost of revenue | 977 | 947 | 3,10 |
| 3 | Gross profit | 1.108 | 1.594 | -30,48 |
What is interesting, not all of the company’ revenue streams recorded a decrease in value.
Contextlogic.Inc' revenue streams and their volumes in 2021
| wdt_ID | Category | Amount as at December 31, 2021 [in mln] | Amount as at December 31, 2020 [in mln] | % change (YoY) |
|---|---|---|---|---|
| 1 | Core Marketplace revenue | 1.177 | 1.827 | -35,57 |
| 2 | ProductBoost revenue | 165 | 200 | -17,50 |
| 3 | Marketplace revenue [total] | 1.342 | 2.027 | -33,79 |
| 4 | Logistics revenue | 743 | 514 | 44,55 |
| 5 | Total revenue | 2.085 | 2.541 | -17,94 |
Revenues generated by the platform recorded a decrease in values, i.e. by 33,79%. Both core Marketplace Revenue and Productboost Revenue have decreased. First of them were equal to $1,177 billion (versus $1,827 billion in 2020), and the second were equal to $165 million (versus $200 milion in 2020)
However, the logistic revenue has increased again. They were higher by 44,55 % than in the previous year. It were equal to $743 million (versus $514 million in 2020).
And what about the operating expanses?
They have also changed, i.e. operating costs decreased by 33,70% during the year. Their value were equal to $1,475 billion (versus $2,225 bilion in 2020).
Contextlogic.Inc' operating expanses in 2021
| wdt_ID | Category | Amount as at December 31, 2021 [in mln] | Amount as at December 31, 2020 [in mln] | % change (YoY) |
|---|---|---|---|---|
| 1 | Core Marketplace revenue | 1.177 | 1.827 | -35,57 |
| 2 | ProductBoost revenue | 165 | 200 | -17,50 |
| 3 | Marketplace revenue [total] | 1.342 | 2.027 | -33,79 |
| 4 | Logistics revenue | 743 | 514 | 44,55 |
| 5 | Total revenue | 2.085 | 2.541 | -17,94 |
The largest decreased occurred in general and administrative’ expenses, i.e. it was 44,06%. They were eqaul to $165 million (versus $295 million in 2020). Costs related to sales and marketing have also depreciated. In 2021, they were lower by 35.48%. They amounted to $1,102 billion (versus $1,708 billion).
What was the company’s financial result at the end of 2021?
As in previous year, Contextlogic.Inc didn’t record a positive net profit.
Contextlogic.Inc' net loss in 2021
| wdt_ID | Category | Amount as at December 31, 2021 [in mln] | Amount as at December 31, 2020 [in mln] | % change (YoY) |
|---|---|---|---|---|
| 1 | Net loss | 361 | 745 | -51,54 |
However, the negative financial result was much lower than in the previous year, i.e. more precisely by 51,54%. Contextlogic.Inc’ net loss for 2021 was equal to $351 million (versus $743 million in 2020)
The financial results of Contextlogic in 2022
The current year has not ended yet, but it is worth to look at the financial data for the first three quarters of 2022.
The company’ revenue for the first quarters of this year is $448 million. The number of active users at the end of the third quarter was 24 million.
Contextlogic.Inc' revenue in Q1,Q2 and Q3 2022
| wdt_ID | Category | Amount at the end of Q1 2022 [in mln] | Amount at the end of Q2 2022 [in mln] | Amount at the end of Q3 2022 [in mln] | Total [amount for the first three quarters 2022 in mln] | Total [amount for the first three quarters 2021 in mln] | % change [YoY] |
|---|---|---|---|---|---|---|---|
| 1 | Revenue | 189 | 134 | 125 | 448 | 1.796 | -75,05 |
| 2 | Cost of revenue | 125 | 92 | 91 | 308 | 808 | -61,88 |
| 3 | Gross profit | 64 | 42 | 34 | 140 | 988 | -85,92 |
As it can be notice their values are clearly lower than in the same quarters of 2021. The obtained values are on average lower by 73,71%. In the first three quarters of this year, the company recorded revenue of $448 million (versus $1,796 billion in similar period a year earlier).
All the company’ revenue streams recorded a similar decrease in value.
Contextlogic.Inc' revenue streams in Q1, Q2 and Q3 2022
| wdt_ID | Category | Amount at the end of Q1 2022 [in mln] | Amount at the end of Q2 2022 [in mln] | Amount at the end of Q3 2022 [in mln] | Total [amount for the first three quarters 2022 in mln] | Total [amount for the first three quarters 2021 in mln] | % change [YoY] |
|---|---|---|---|---|---|---|---|
| 1 | Net loss | 60 | 90 | 124 | 274 | 303 | -9,57 |
At the end of the first 3 quarters, the company’s marketplace revenue was equal to $220 million (versus $1,175 billion in similar period a year earlier). This is the decrease of 81,27% year to year. Whereas, the Contextlogic.Inc’ logistics revenue amounted to $228 million (versus $621 million in the same period a year earlier). In this case, the decrease was 63,28%.
What about the operating expenses?
They have also decreased, i.e. by 67,38 %. At the end of the first three quarters, they were equal to $421 million.
Contextlogic.Inc' operating expanses in Q1,Q2 and Q3 2022
| wdt_ID | Category | Amount at the end of Q1 2022 [in mln] | Amount at the end of Q2 2022 [in mln] | Amount at the end of Q3 2022 [in mln] | Total [amount for the first three quarters 2022 in mln] | Total [amount for the first three quarters 2021 in mln] | % change [YoY] |
|---|---|---|---|---|---|---|---|
| 1 | Sales and marketing | 45 | 56 | 80 | 181 | 1.013 | -82,13 |
| 2 | Product development | 66 | 46 | 42 | 154 | 157 | -1,91 |
| 3 | General and administrative | 15 | 31 | 40 | 86 | 121 | -28,93 |
| 4 | Total operating expenses | 126 | 133 | 162 | 421 | 1.291 | -67,39 |
| 5 | Loss from operations | -62 | -91 | -128 | -281 | 303 | -7,26 |
The largest decrease in value was recorded by sales and marketing’ expanses. They have decreased by 82,13% year to year. On the second place are general and administrative costs – drop 28,93%. Expenditure related to product development has changed the least, i.e. they have only decreased by 1,91%.
What about net loss?
At the end of the first three quarters, the company’s financial result remains negative, but the net loss is lower than in the same period of 2021. It amounts to $274 million (versus $304 million).
Contextlogic.Inc' net loss in Q1,Q2 and Q3 2022
| wdt_ID | Category | Amount at the end of Q1 2022 [in mln] | Amount at the end of Q2 2022 [in mln] | Amount at the end of Q3 2022 [in mln] | Total [amount for the first three quarters 2022 in mln] | Total [amount for the first three quarters 2021 in mln] | % change [YoY] |
|---|---|---|---|---|---|---|---|
| 1 | Sales and marketing | 45 | 56 | 80 | 181 | 1.013 | -82,13 |
| 2 | Product development | 66 | 46 | 42 | 154 | 157 | -1,91 |
| 3 | General and administrative | 15 | 31 | 40 | 86 | 121 | -28,93 |
| 4 | Total operating expenses | 126 | 133 | 162 | 421 | 1.291 | -67,39 |
| 5 | Loss from operations | -62 | -91 | -128 | -281 | 303 | -7,26 |
The company’s actions taken from the beginning of 2022
In accordance with the company’s announcement regarding the adopted change strategy in terms of improving the consumer experience, deepening commercial relations and achieving operational efficiency, the following actions have been taken during the last 12 months:
- it was introduced a new process of selecting sellers who will have to go through a multi-stage qualification process before they start selling via the Wish platform;
- This action is to strengthen the position of sellers who care about serving their customers and at the same time lead to growth in users’ trust in the Wish platform.
- a new partnerships was established with Wix – a global SaaS platform for creating, managing and growing an online presence. This partnership is designed to give Wix e-commerce sellers access to the Wish Platform’s global user base;
- Wix merchants have been given the opportunity to extend the capabilities of their online stores with elements of entertainment known from Wish, i.e. discovering online shopping based on the customer’s interests. In addition, they also have access to analytical and optimization tools, which so far only registered users of the platform belonging to Contextlogic.Inc had a chance to use.
- a new partnerships was established with the e-commerce customer service platform e-Des;
- All Wish merchants in the US and European countries can view and handle customer inquiries from Wish and other major e-commerce platforms.
- a new partnerships was established with EverC, a leading provider of commercial and market risk analysis and insights for e-commerce and payment providers. The goal of both companies is to fight against counterfeit products available on the market;
- The MarktetView tool, which detects dangerous, illegal and counterfeit products in seconds using artificial intelligence technology, has been implemented on the Wish platform.
- a new partnerships was established with two leading Latin American logistics providers, i.e Moovin in Costa Rica and Servicios Postales del Perú (Serpost) in Peru. This partnership has allowed the Wish platform to become one of the fastest cross-border e-commerce platforms in both markets;
- The delivery time of products has been shortened by more than 15 days;
- There is an exchange of experiences between entities in the field of supply to consumers in the Latin American region, i.e. this applies to the comprehensive visibility of tracking and delivery confirmation, packaging of shipments for many items or SMS notifications about shipments awaiting collection.
Coming back to the question: Is the decline in Contextlogic.INC stock justified?
To be honest, there is no any reason for such a spectacular drop in Contextlogic.Inc’s share price, which has been going on since Q1 2021. Of course, the significant decrease in the number of users of the Wish platform, as well as the related decrease in the company’s revenues and the issue of removing the platform from the search results in France, were the basis for the decline in the share price. But still, the drop in price is disproportionate to the facts.
However, many changes have been made within the organization and on the platform itself during this period, which give an optimistic forecast for the future. In turn, this should support Contextlogic.Inc’s share price.
Is Contextlogic.Inc stock a good investment opportunity?
Taking into account the entire history of Contextlogic.Inc and the activities of its members during the last year for its solution, it can be said that the worst period is behind the company, and any positive indications about the company’s financial results or regarding the Wish platform can cause euphoria among investors, contributing to the increase in the value of shares.
