It's shaping up to be a tough period for ContextLogic Inc. (NASDAQ:WISH), which a week ago released some disappointing second-quarter results that could have a notable impact on how the market views the stock. It was a pretty negative result overall, with revenues of US$656m missing analyst predictions by 9.3%. Worse, the business reported a statutory loss of US$0.18 per share, much larger than the analysts had forecast prior to the result. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Taking into account the latest results, the eleven analysts covering ContextLogic provided consensus estimates of US$2.27b revenue in 2021, which would reflect a not inconsiderable 20% decline on its sales over the past 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 72% to US$0.67. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$3.18b and losses of US$0.56 per share in 2021. There's been a definite change in sentiment in this update, with the analysts administering a notable cut to next year's revenue estimates, while at the same time increasing their loss per share forecasts.
The consensus price target fell 40% to US$10.33, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic ContextLogic analyst has a price target of US$20.00 per share, while the most pessimistic values it at US$5.00. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how analysts think this business will perform. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that sales are expected to reverse, with a forecast 36% annualised revenue decline to the end of 2021. That is a notable change from historical growth of 30% over the last year. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 16% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - ContextLogic is expected to lag the wider industry.
The Bottom Line
The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at ContextLogic. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for ContextLogic going out to 2023, and you can see them free on our platform here..
It is also worth noting that we have found 2 warning signs for ContextLogic that you need to take into consideration.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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