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Sunday, May 28, 2023

ContextLogic: CFO Departure Raises Execution Risk

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Shares of ContextLogic (WISH) soared by 66% in June, as retail investors added the e-commerce platform to the list of favorite meme stocks. However, as an indication of what a slog 2021 has been so far, even after the retailers’ endorsement and the strong gains, the shares still sit 36% into the red on a year-to-date basis.

And according to Evercore’s Shweta Khajuria, the latest news to come out of WISH HQ is indicative of trouble ahead.

Last week, the company announced the departure of CFO Rajat Bahri, who will leave his post on July 23. Considering that over the past few years Bahri played a big part in the company’s huge growth spurt and had a key role in last year’s IPO, Khajuria thinks his departure merits a rethink of her WISH model.

“We are stepping to the sidelines post the news as we believe the departure of a tenured CFO this early post an IPO is a negative,” the 5-star analyst said. “The lack of a CFO could create some distraction for the company’s leadership team and near-term uncertainty around operational execution. While we acknowledge that the incoming CFO could be someone with great experience who has the potential to set the company up for its next growth phase, we also think it could take some time before we see those benefits.”

Of course, Khajuria hasn’t closed the door on a reevaluation but that is dependent on several factors coming together. The analyst says near-to-mid-term “consistent, successful execution” could lead to an “inflection of fundamental trends.” Namely, robust double-digit percentage buyer growth built on an efficient sales & marketing push, would provide an indication WISH can make a successful dent in its sizable TAM (total addressable market) and “potentially gain share.” And should the company post financial results in the coming quarters which display “improving fundamental trends,” a re-rating “opportunity” could naturally follow.

For now, however, the rating drops from Outperform (i.e., Buy) to In Line (i.e., Hold) and the price target is reduced from $17 to $13. However, there’s still potential upside of 12% from current levels. (To watch Khajuria’s track record, click here)

In contrast to most meme stocks, Khajuria’s peers appear to think the stock is currently undervalued. The $16.8 average price target suggests one-year gains of 44%. All in all, based on 2 Buys vs. 3 Holds, the analyst consensus rates WISH stock a Moderate Buy. (See WISH stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

The post ContextLogic: CFO Departure Raises Execution Risk appeared first on TipRanks Financial Blog.

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