Stocks to buy

Some folks might point to mobile e-commerce company ContextLogic (NASDAQ:WISH) as an example of what can go wrong when people buy initial public offering (IPO) stocks. After all, WISH stock hasn’t performed well since the company’s IPO.

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I’ll grant that there’s a cautionary lesson to be learned from this. People who jumped the gun and invested in ContextLogic too early are unfortunately holding a heavy bag at the moment.

Today, however, I’d like to offer some hope to the owners of WISH stock. Moreover, I want to provide some reasons to consider buying some of ContextLogic’s  shares today.

As we’ll see, there’s a vast market for ContextLogic to capture – and ContextLogic is making strides across multiple geographies.

A Closer Look at WISH Stock

ContextLogic’s IPO took place on Dec. 16, 2020, with the stock opening at $24. There was an initial burst of enthusiasm by traders  as WISH stock climbed to a 52-week high of $32.85 on Feb. 1, 2021.

After peaking, the stock commenced a multi-month decline, landing at the $8 level in May.

The summer brought a return to the $10 area, but early investors are still waiting for the shares to climb further.

At the same time, ContextLogic’s  earnings per share over the 12 months that ended in March  is -$3.16.

Undoubtedly the company’s investors would prefer a profit, so hopefully ContextLogic can get that number into positive territory soon.

Additionally, traders should mark August 12 on their calendars. After the market closes on that day, ContextLogic will report its second-quarter financial results.

If all goes well, that event could be the catalyst that pushes WISH stock back up to its IPO price, if not its all-time high.

A Huge Market Opportunity

Of course, Wish isn’t the only popular e-commerce platform out there. Yet it addresses a niche market which is potentially quite lucrative.

According to ContextLogic’s website, the global mobile e-commerce market was valued at $1.3 trillion in 2019. However, it will grow to an estimated $2.4 trillion by 2024.

No one expects Wish to capture a majority of that market. But within it, there’s a large, yet under-penetrated consumer group.

Specifically, e-commerce businesses might be modern in some respects, but they’re also sometimes too closed-minded, as they tend to overlook value-conscious shoppers.

ContextLogic reports that over 1 billion households worldwide have income of less than $75,000 annually.

Some traditional e-commerce companies might not choose to court this category of consumers, but ContextLogic isn’t afraid to pursue them.

Growing in All the Right Places

Value/discount shopping is a real phenomenon and not just because some people are “cheap.”

A recent survey from Vericast concluded that 83% of consumers purchased at least one item during the last six months because of a coupon or discount.

Getting a bargain online is fun, and it’s a great way to save money. The Wish platform is tailor-made to appeal to the army of discount seekers out there.

And when I say, “out there,” I really mean globally.

During Q1, ContextLogic’s Core Marketplace revenues jumped 40% year-over-year  – and those sales didn’t all come from just one region.

When we break ContextLogic’s Q1 Core Marketplace revenue growth down by geography, we paint a powerful picture:

  • North America: +48% year-over-year
  • Europe: +48% year-over-year
  • South America: -22% year-over-year
  • Rest of world: +19% year-over-year

It’s interesting that the sales of ContextLogic’s Core Marketplace fell in South America. Perhaps that’s something which the company should focus on in the coming quarters.

But it seems like everywhere else, ContextLogic is growing and preparing to dominate its chosen niche market globally.

The Bottom Line

WISH stock may have disappointed early-stage investors, as its share price still has a lot of catching up to do.

At the same time, ContextLogic is making inroads into multiple geographies and into a lucrative market that targets value-focused online shoppers.

Consequently, the stock itself looks like a terrific bargain for traders who love a good discount.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.