Is there an end in sight to the ContextLogic collapse?
Although ContextLogic shares fell another 14% this week, analysts remain upbeat on the stock.
- ContextLogic Inc (NASDAQ: WISH) shares are down by another 14% this week, closing just above US$10 on Thursday (15 July 2021)
- The parent company of shopping app WISH is facing a securities class action, whose lead plaintiff deadline is this week
- Despite the stock's current bearishness, analysts continue to rate it a 'buy'
- Bucking the trend are Evercore analysts, who downgraded their call to 'in line' and price target to US$13
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WISH share price: why are analysts still bullish?
ContextLogic shares plunged by another 14% this week, ahead of a 16 July lead plaintiff deadline for a securities class action against the company.
The stock is trading 58% below its initial public offering (IPO) price of US$24, and is down 48% year to date.
Despite WISH’s current bearishness, the latest analyst sentiments published by MarketBeat show a consensus rating of ‘buy’ and price target of US$22.83 on the stock.
The price target equates to a 126.3% upside potential from its last traded price of US$10.09 on Thursday.
Earlier this month, however, Evercore ISI analysts downgraded their call on ContextLogic to ‘in line’ from ‘outperform’, alongside a reduced price target of US$13 (from US$17 previously), following the departure of the company's Chief Financial Officer Rajat Bahri.
The analysts noted that Bahri's exit is a cause for concern, especially considering the e-commerce company's ‘rocky public debut’.
Why is a lawsuit being filed against ContextLogic?
A securities class action is currently pending, in which a group of investors who purchased shares in the company's December 2020 IPO or on the open market are alleging that ContextLogic's IPO registration documents ‘materially overstated’ the company's business metrics and financial prospects.
According to Hagens Berman - one of the law firms representing WISH investors, ContextLogic’s IPO registration documents had claimed that its then 108 million monthly active users (MAUs) was a key driver of revenue growth.
However, the law firm alleges that by the time of its December 2020 IPO, ContextLogic's MAUs had declined materially.
On 08 March 2021, the parent company of the WISH platform disclosed that its MAUs had ‘declined 10% year-on-year during Q4 to 104 million’ in its 4Q 2020 and full-year results.
IPO registration documents also ‘failed to disclose this known trend reasonably likely to materially impact ContextLogic's profitability’, Hagens Berman added.
What’s your take on ContextLogic shares? Do you think it will continue to fall? Take your position today.
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