What happened
Two weeks ago, shares of ContextLogic (WISH 3.23%) exploded higher after the e-commerce company received an endorsement from an unlikely source. Today, the stock gave up most of those gains due to a weak quarterly report and a sober outlook from management.
As of 2:19 p.m. ET, shares were down 28.5%.
So what
ContextLogic runs Wish.com, an e-commerce site that attempts to match consumers to deals on products that they have expressed an interest in buying. Wish.com has been in business for more than a decade, but has never really gained traction as other e-commerce sites took off.
But the company -- and the stock -- was thrust into the spotlight earlier this month after Citron Research, a Wall Street firm best known for going short, called ContextLogic the "most asymmetrical opportunity" on its radar. Citron argued that the Wish.com was likely to benefit from a Super Bowl ad from PDD-owned Temu, a Wish.com competitor, which "reintroduced" the world to the model.
But management appears not to be as enthusiastic about the quarters ahead. Late Thursday, ContextLogic reported a $0.16-per-share loss on revenue of $123 million, which was slightly better than the $0.18-per-share loss analysts had expected, but revenue was $29 million shy of the consensus estimate. Revenue fell 57% year over year.
"As we enter fiscal year 2023, there remains much work to be done to put us back on the path to profitability and sustainable growth," CEO Joe Yan said in a statement. "We intend to maintain a disciplined cash flow and a relentless focus on unit economics to retain a solid financial foundation that will allow us to effectively maximize the business opportunities ahead."
Now what
Yan is focused on a turnaround, noting the company's January layoffs were "a tough decision to reduce our global workforce to support our business prioritization initiatives, better align resources, and improve operational efficiencies." And ContextLogic does expect minor improvement in 2023, forecasting an adjusted EBITDA loss of between $70 million and $80 million compared to the $95 million loss in 2022.
But the projections for the year are a lot more sober than the excitement surrounding ContextLogic shares following the Citron endorsement. Given the challenges facing this business, investors appear to be having second thoughts about rushing in.
