The Consensus EPS Estimates For ContextLogic Inc. (NASDAQ:WISH) Just Fell Dramatically

The analysts covering ContextLogic Inc. (NASDAQ:WISH) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business. Surprisingly the share price has been buoyant, rising 14% to US$7.94 in the past 7 days. It will be interesting to see if the downgrade has an impact on buying demand for the company's shares.

Following the downgrade, the consensus from six analysts covering ContextLogic is for revenues of US$443m in 2023, implying a measurable 7.3% decline in sales compared to the last 12 months. Losses are expected to be contained, narrowing 16% from last year to US$14.71. Yet before this consensus update, the analysts had been forecasting revenues of US$507m and losses of US$12.96 per share in 2023. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

Check out our latest analysis for ContextLogic

The consensus price target fell 38% to US$8.64, 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. Currently, the most bullish analyst values ContextLogic at US$12.00 per share, while the most bearish prices it at US$4.40. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Of course, another way to look at these forecasts is to place them into context against the industry itself. One thing that stands out from these estimates is that shrinking revenues are expected to moderate over the period ending 2023 compared to the historical decline of 58% per annum over the past three years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 11% per year. So it's pretty clear that, while it does have declining revenues, the analysts also expect ContextLogic to suffer worse than the wider industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at ContextLogic. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.

So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with ContextLogic, including dilutive stock issuance over the past year. Learn more, and discover the 3 other warning signs we've identified, for free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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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.