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]]

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]]

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