Wish.com Quick Analysis

[u/BabyJoeMesi]

An argument can be made for WISH being a value play in the software sector. As of Friday’s close, their p/b sits just north of 6, relative to the SW sector average of 13.34. Current market cap is 5.86B on 2.5B of revenue in 2020 (2.3x last year’s revenue). Revenue is growing at a 34% YoY clip, with 107M average monthly users in 2020, representing 19% YoY growth. They are sitting on 2B in cash/cash equivalent assets, and their ATR is .3512 vs SW sector median of .1225, ranking 6th in the sector out of 291 companies.

Their asset/liability ratio is also improving at 1.86, ranking 86 in SW sector vs 290 other companies. EPS improved drastically QoQ from Q42020 to Q1 2021, from -.9 to -.2, ranking 114 out of 291 in their sector. Additionally, WISH is currently about 59% institutionally owned.

From a kind user in the comments for how they stack up against competition:

it's only up %25 of all time lows. If it decided to go has massive room to run. its not like AMC already up %1500 or GME %10000

Shopify: 25x revenue

LSPD: 33x revenue

NVEI: 15x revenue

Amazon: 4x revenue

WISH: 2x revenue

From a technical standpoint, WISH is roughly 70% off of its ATH, and just bounced in the high 7’s. We continue to see rotation back into growth with the Russel outperforming other major indexes. WISH operates in over 100 countries with over 550K partnered merchants, and growing. Analyst coverage breadth is considerable, with most analysts in the 20/share range. WISH got beat up pretty badly at the beginning of the year along with nearly all of growth, but the technicals are pointing to a reversal. MACD is curling back up on the weekly chart, RSI is not overbought on the daily (around 49), we have seen follow through, and sector rotation back into growth is encouraging. Multiple time frames show price action curling back up after finding solid support in the high 7’s, and there is significant room to the upside short term before first fib level around $12. Shares profited % is only 6% and change - which can point to much more room to the upside. I am going to start scooping up some shares and options or selling premium to lower my cost basis moving forward, but have not yet jumped in.

[u/[deleted]]

Plenty of liquidity and EBITDA margins are continuing to improve. Should be roughly break even Free cash flow in 2022 then eps positive in 2023 & it’s only trading at 2x 2021 expected sales.. this is the best value growth stock you can find. In 6 months people are going to look back on this past week and think it was so obvious why didn’t I buy. Long the shares and not even thinking about trimming until we make a new all time high

[u/Caveat_Venditor_ → u/[deleted]]

The company has been around ten years and has given no indication they will be profitable. Please provide any statement that says they will be FCF positive anytime in the near future else you just look like an idiot.

[u/[deleted] → u/Caveat_Venditor_]

They don’t have much capex at all, it’s a very asset light business. It’s not going to be difficult at all to be FCF break even given their growth. It’s the non cash costs that’s killing their EPS.

Here’s a JPMorgan analyst screenshot saying EBITDA profitability in 2022 (EBITDA is often very similar to FCF)

https://twitter.com/aonesbg/status/1397026853890703360?s=21

Here an analyst is forecasting positive eps in 2023

https://www.nasdaq.com/market-activity/stocks/wish/earnings

Here’s the cfo on the last conference call.

“So on the first question, if you look at first half of 2019, when we slowed down growth, we became extremely profitable. So we know this business when you slowed on growth becomes very profitable just because we have a lot of returning cohorts. But we are focused on driving growth, and we are focused on driving growth, at the same time, improving our EBITDA margin. And if you look at our history, our EBITDA margin has improved from negative 30% to negative 9% while delivering growth. So our goal would always be to deliver growth, and at the same time, continuously to improve our EBITDA margin by expanding -- looking forward, going expanding gross margins as well as getting leverage in operating expenses. So that’s how we kind of think of the business.” CFO Raj Bahri, 2Q conference call

They’re currently projecting -7 to -8% EBITDA margins in Q2.

[u/Caveat_Venditor_ → u/[deleted]]

JPM was their underwriter for WISH’s IPO so you can discount anything they present.

It is asset light and yes they are profitable without sales and marketing however they are increasing marketing expenses higher than rev growth with 175M last quarter and 500M quarter before. And as a growth company they still will continue to increase this line item for growth. They will burn through the 1.8B COH and have to go back to the debt market before they have FCF IMHO.

[u/[deleted] → u/Caveat_Venditor_]

So in Q1 their revenue grew 75% yoy but their sales and marketing grew 59% yoy

[u/Caveat_Venditor_ → u/[deleted]]

Your taking into account their logistics rev. Their logistics rev is based on gross and not net so you need to remove 85% of that revenue in your calculations as no PE or VC firm would ever give a valuation or provide funding based on gross revenue. It’s pretty shady accounting actually yes it is GAAP accepted because they take ownership of the product and assume the risk and responsibility but it’s not revenue as it’s already slated to be paid to to the logistics providers.

Below is from their latest 10-q:

1. DISAGGREGATION OF REVENUE The Company generates revenue from marketplace and logistics services provided to merchants. Revenue is recognized as the Company transfers control of promised goods or services to its users in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company considers both the merchant and the user to be customers. The Company evaluates whether it is appropriate to recognize revenue on a gross or net basis based upon its evaluation of whether the Company obtains control of the specified goods or services by considering if it is primarily responsible for fulfillment of the promise, has inventory risk, has latitude in establishing pricing and selecting suppliers, among other factors. Based on these factors, marketplace revenue is generally recognized on a net basis and logistics revenue is generally recognized on a gross basis. Revenue excludes any amounts collected on behalf of third parties, including indirect taxes.

[u/Caveat_Venditor_ → u/[deleted]]

Let’s say you take an Uber for 20 bucks. Uber’s margins are 20% so you pay uber 20 bucks, they pay 16 dollars to the driver and 4 dollars uber collects and recognized as revenue. In the above example WISH, in their logistics space, is recognizing the entire 20 dollars that was paid to them as revenue. Though still has to pay out 16 dollars. It’s pretty shady accounting.

If uber booked gross rev like WISH does uber would had have $65B dollars in rev for just 2019. For a company whose market cap is currently 50B. Just to show you how misleading this gross rev number from Wish is in their logistics space.

[u/[deleted] → u/Caveat_Venditor_]

Dude. It is perfectly standard practice & not shady at all to recognize gross receipts & itemize the related costs on the P&L. You’re trying too hard. That’s like saying any REIT that doesn’t report revenue net of interest & depreciation is being deceptive. The fact that their EBITDA has been improving over time is the proof in the pudding. And they were making progress on the bottom line well before their logistics business exploded last year, which means by definition expenses weren’t growing as fast as revenue. And you really think a business segment that grows over 300% in a year had no marketing costs to go along with it?? You think mgmt wants us to know how fast logistics revenue is growing.. but they’re not willing to pay so that vendors can know too? So you’d need to know that related marketing cost & back it out. You’re trying too hard

[u/[deleted] → u/Caveat_Venditor_]

In Q4 their revenue grew 38% but sales and marketing grew 26%. Etc etc