My view on $WISH

First of all it's not a financial advice so please do your own DD before investing on anything and only invest the amount you are fully prepared to loose! Also if you are a conservative investor, Index fund is far far better and if you are a value investor, there are ton of opportunities out there and always will be. This is a growth bet ! I am long WISH and I might be little biased; however I am in it to make money so I heartily welcome all LONG BEAR points; not short. Short terms are mostly driven by events and not business fundamentals so WISH could go to $2 if people do not like the new CEO for example ! There is no limit how much low a stock can go unfortunately; please go read Peter Lynch. If you are trying to time the market, good luck!! Also if you are a day trader, good luck to you as well !! - I recently read a post from fellow investor who turned over $28 million in a year and was in negative $7600 :) I personally think it's not worth the time and emotional well being. What I have learned during my 5 years investing journey is that stocks mostly move up and down driven by sentiment; it comes down to demand and supply - if people are willing to sell for less OR if there are less buyers than sellers, price moves down. These are mostly driven by `catalysts` - a positive/negative earnings, black/white swan events, macro events or even a PR ! But these moves do not usually last long so unless you are trying to time the market, its very difficult to win most of the time. I would mostly like to focus on two things on this DD - why WISH is down? and if it can recover. ​ Why WISH is down so much? Sector rotation: The short answer is sector rotation - BIG money going elsewhere. It's just not WISH, the whole growth small cap sector is down big time. And there are some add-ons to it - SPAC/new IPOs are further down, e-commerce sector is further down, growth are hammered, companies having China ties are further down. Just look at one year chart of these companies for example - STNE (Warren buffet is an investor), BABA (Charlie Munger), CLOV/OPEN (Chamath); TDOC, CRSP (Cathie Wood) even PayPal and SQ are down big time. Remember February last year? It doesn't take much time to move them back up if BIG money flows back in :) ​ Macro events: Chinese govt crackdown on tech companies- BABA, DIDI,BAIDU and whole Chinese tech. This negatively effected WISH as well. Reopening of economy drove consumers to stores and it made the 2nd quarter look bad. All e-commerce revenue is down including ETSY and AMZN not just WISH. Apple changed privacy policy and it had huge impact on Ad spending (it impacted many growth companies who relied on Ad spending to procure customers) - price went up 2-3 times. Supply chain issues - specifically goods coming out of China. Inflation and rising interest fear in the market though it shouldn't effect WISH as it has no debt. ​ Other WISH specific catalysts: CFO's departure BIG investors exit Slow down (pause) of growth and MAUs down CEO's leaving Down trend causing price to go further down - sentiment, margin call, tax harvesting and few others. Meme tag ​ And finally some noise: Negative short articles all over (by shorts) Lawsuits (mostly fake) High short selling (by short term traders) Insiders selling (no real selling - almost all of them are for tax purpose to cover RSU) ​ Now, can WISH recover? Absolutely ! Go look at NIO, ETSY, TSLA, AMD and even AMZN - you can find many. It may take some time since there are ton of attractive companies to invest in right now - let's just take BABA for example; I believe it should be trading at 3x today. But I am staying put at WISH because I believe BABA can't 10x and WISH has that potential. Here's why: ​ Has been built over a period of decade and over $2 billion has been invested in the business (including advertisings) before IPO money. Go look at CrunchBase - there were many rounds of investing and many investors invested over $5b valuation level before 2015. As everybody knows WISH was offered by AMZN and BABA $10 billion in 2015. 500 million plus downloads in Google play store with about 14 millions over 4 star reviews! Over 2.4 million positive reviews on Apple Store, top 5 e-commerce global platform in many countries - Can you believe it? $1 billion enterprise value with $1.2 billion hard cash? Compare that to Aliexpress and other e-commerce platform. Came from IPO and not SPAC route. When companies go for IPO, due diligence/valuation is little strict compared to SPAC deals as the Banks have to underwrite. It was valued at $24 a share. At the time JPMC and few others have $30 PT for 2021. Business has actually improved a lot since then if we forget growth for a min which is proportionate to Ad spending. Is a global e-commerce platform and not US only like ETSY, Wayfair, Overstock etc.. It's not cheap to build a global e-commerce platform so there is a significant barrier of entry. Has its own business segment that no US/Western company has - serving low to middle class value seeking customer base. Since it is global, it has huge potential to penetrate into India, Brazil and African markets as well. Look at Flipcart (India), MercadoLibre (brazil), Jumia (africa) - WISH do not need to win anywhere, just a small slice of cake is more than enough to increase revenue significantly! Has now built its own logistics business - $1 billion revenue is not a joke! Imagine small merchants being able to ship worldwide effortlessly! Most of the third world countries have copyright issues/fake product issues - they are willing to spend higher if they can buy authentic Nike shoes for example. Has $1.2 billion in cash and no debt. Over the period of last 6 months I have investigated many companies and I haven't seen any companies in WISH's size to have that much money with no debt AND this level of Revenue ! Inflation and rising interest rates are no problem for WISH. I've read people's concerned about cash burn, but that's going to be stabilized starting this quarter. $1 billion is a lot of money to spend for growth! It can even buy small companies to diversify its business, invest in new technology and even buy it's own share (its highly unlikely for growth companies though). WISH actually has already been working on WISH clips, live shopping and new influencer led businesses. I believe 1Sansome has potential to be a billion dollar business in no time ! Go look at SHEIN -I encourage people to compare SHEIN and 1Sansome website. SHEIN is now a $10 billion dollar business. Social commerce that WISH is heading into is already more than a $1T business. - https://ark-invest.com/articles/analyst-research/social-commerce-the-next-wave-in-online-shopping/ Is promptly acting to align/fix it's business - revamping it's website, introducing video clips/live shopping, fixing merchant/product quality issues, improving shipping time and potentially getting into new business segments - fintech, payment processing, trend shopping etc. Got the best management in place now. Forget Peter - he was an engineer and not a business person. Google was actually run by Eric Schdmit and was brought in by the founders Surgery and Larry. I recognize the charm about founder led companies but he still does own about 20% of the business so he is vested. In fact, he is the one who brought Jackie in. Peter has become millionaire from billionaire so he has the most vested interest in WISH than any of us! and I encourage people to go read Jackie's employment terms - her major compensation starts when the WISH stock reaches $30! Also most of the higher management is paid in RSU so its in their interest to make the company successful and remain with WISH. Has the most cost efficient business model - It doesn't need investment in physical warehouse -WISH Local is now just paused but it has huge potential. It's employee efficiency is highest in the industry - just about 1,000 people running the company VS SHEIN with 10,000 employees ! Rising Ad costs are effecting every e-commerce growth companies but WISH's Ad campaign is the most efficient of most of them. In fact Facebook offered $20 million for its Ad algorithm very early on. I've read many posts that WISH Ad campaign is one of the most efficient campaign in Facebook so it would fare better and can remain competitive. They got the best Data science team - look at their patents! It's a data science / AI company as well. Even though WISH's revenue is decreased and MAU's have decreased, it's still very significant - go compare with ETSY. This quarter is important - if it can become close to EBTDA positive with less Ad spending and still manages to maintain 40M active users and about 1.5B revenue, it's already a lot ! I do not see any issues doubling the revenue if WISH can make those customers happy and increase their LTV - 40 millions of `active` customers are a lot of customers. Major competitor is Aliexpress but go try buying something from there and try to return an item or settle an issue! You have to deal with the seller first. WISH no question asked - you even keep your item. Also WISH is growing its merchant base all the world - about 50% are now US based. E-commerce segment is growing fast and would pass $8 trillion by 2025. With fast delivery and last mile delivery solved, traditional competitors like dollar general, five below and even Macy's JCPenny and most will be wiped out or wouldn't be able to compete. WISH should benefit. ​ Common perceptions: Selling Chinese products => It's not even a point - more than 90% products sold all over the world are from China and it's for a reason - its most cheaper to manufacture products there. Most items Amazon sells are made in China. But the point is WISH is trying to create/promote Chinese brands - Assume a Chinese shoes brand that compares with Nike but half the cost. Selling dildos => Sex toys are billions of dollar business. I don't see negatives there. Selling cheap products -=>it's the main business ! Dollar General has $50 billion market cap alone and there are others - dollar tree, five below and even Japanese Daiso. Selling fraudulent products => It's not WISH selling them, its the sellers. Could you not post anything on facebook marketplace? I am not saying it's not an issue and I think WISH is working hard to discourage/minimize those sellings. Float too high for short squeeze => Look at Nokia; it went up 80% in one day last year - it has 10 times the float of WISH. Cash burn => I would like to point out that companies are not usually upfront about investments. For example google categories them under `New bets`. So investment in 1Sansome for example might be hidden under SG&A ! We do not know what else is out there investment/initiative wise. France ban => I take that as positive and it will be solved soon. WISH was already working on to fix quality/merchant issues - https://merchant.wish.com/documentation/api/v3/reference#tag/EU-Product-Compliance Going to zero => It may go down further but not going to zero. Only companies with debt are in immediate risk of going bankrupt. $1 billion is more than enough to create few startups. ​ Here are few upcoming catalysts: New CEO => Whoever is brought in, his fortune will be tied to WISH. Also whoever it is, it would be far better than Peter business wise. Fourth Qtr earnings => Cash burn should stabilize and it should be close to EBTDA positive, if not a surprise profit ! Website revamp => Hopefully it will fix many issues including having to login ! I also think just a minor fix such as sorting a search results by price, reviews, sales and other metric should drive sales. Right now, I can't sort by specific products that are highest sellers in the category ! Its so dumb :) Video shopping/Live Streaming => This is now big in China - look at Pinduoduo and others. Social commerce is the next BIG thing - a next gen QVC. Potential buyout => I am personally not interested in buyout but its a possibility if it goes further down. Wish standard, Wish access, revamped website, quality control, Wish clip and efficient use of marketing dollar should help return to growth. Also very excited about 1Sansome - I believe its a underdog. Investors who sold for a loss (tax harvesting) might be returning soon. For example I can't imagine why Jack Morris wouldn't buy back WISH at $3 unless he was not true about his WISH investment before. I have a feeling we will see Institutional investment reaching back above 80% when the SEC filings come out this quarter. Vanguard now is the 2nd highest investor and its average is about $8. ​ Add-ons: - If share price doesn't reach at least $17 by March 2023, Jackie gets 0. In order to fully vest her RSU price has to be at least $35. If the buyout occurs, stock price has to be at least $17 in order for her to make any money. Please note she is full time - https://www.sec.gov/Archives/edgar/data/1822250/000119312521159033/d124710dex991.htm ​ Recent hires: Jacqueline Reses, EC (yahoo, alibaba, square) - https://www.linkedin.com/in/jacqueline-reses-938b7850/ ? - CEO Farhang Kassaei, CTO (ebay, google) - https://www.linkedin.com/in/farhang-kassaei-628b86/ Jerry Louis, VP Engineering (abay, bookings) - https://www.linkedin.com/in/jerrylouis/ Tarun Jain, CPO (google, twitter, flipcart) - https://www.linkedin.com/in/tarunj/ Nishant Banore, VP Growth Products (ebay, amazon) - https://www.linkedin.com/in/nishantbanore/ Dhruv Mehrotra, VP Products (wallmart, mercari) - https://www.linkedin.com/in/mehrotra/ Mauricio Monico, VP Products (google, ebay, facebook) - https://www.linkedin.com/in/mauriciomonico/ Vivian (Ying) Liu (huwaii, lexmark, shutterfly) - https://www.linkedin.com/in/vivian-ying-liu-34406a3/ Alan Small, Europe - https://www.linkedin.com/in/alan-small-48b55126/ Juli Shimodaira, Japan - https://www.linkedin.com/in/julis813/ Shira Levine, Australia/Japan - https://www.linkedin.com/in/supershiralevine/ ​ Update 1: I hope 1/11/22 marks the beginning of downtrend reversal. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ -

back

My view on $WISH

bullish

First of all it's not a financial advice so please do your own DD before investing on anything and only invest the amount you are fully prepared to loose! Also if you are a conservative investor, Index fund is far far better and if you are a value investor, there are ton of opportunities out there and always will be. This is a growth bet !

I am long WISH and I might be little biased; however I am in it to make money so I heartily welcome all LONG BEAR points; not short. Short terms are mostly driven by events and not business fundamentals so WISH could go to $2 if people do not like the new CEO for example ! There is no limit how much low a stock can go unfortunately; please go read Peter Lynch. If you are trying to time the market, good luck!! Also if you are a day trader, good luck to you as well !! - I recently read a post from fellow investor who turned over $28 million in a year and was in negative $7600 :) I personally think it's not worth the time and emotional well being.

What I have learned during my 5 years investing journey is that stocks mostly move up and down driven by sentiment; it comes down to demand and supply - if people are willing to sell for less OR if there are less buyers than sellers, price moves down. These are mostly driven by `catalysts` - a positive/negative earnings, black/white swan events, macro events or even a PR ! But these moves do not usually last long so unless you are trying to time the market, its very difficult to win most of the time.

I would mostly like to focus on two things on this DD - why WISH is down? and if it can recover.

Why WISH is down so much?

Sector rotation:

  • The short answer is sector rotation - BIG money going elsewhere. It's just not WISH, the whole growth small cap sector is down big time. And there are some add-ons to it - SPAC/new IPOs are further down, e-commerce sector is further down, growth are hammered, companies having China ties are further down. Just look at one year chart of these companies for example - STNE (Warren buffet is an investor), BABA (Charlie Munger), CLOV/OPEN (Chamath); TDOC, CRSP (Cathie Wood) even PayPal and SQ are down big time. Remember February last year? It doesn't take much time to move them back up if BIG money flows back in :)

Macro events:

  • Chinese govt crackdown on tech companies- BABA, DIDI,BAIDU and whole Chinese tech. This negatively effected WISH as well.
  • Reopening of economy drove consumers to stores and it made the 2nd quarter look bad. All e-commerce revenue is down including ETSY and AMZN not just WISH.
  • Apple changed privacy policy and it had huge impact on Ad spending (it impacted many growth companies who relied on Ad spending to procure customers) - price went up 2-3 times.
  • Supply chain issues - specifically goods coming out of China.
  • Inflation and rising interest fear in the market though it shouldn't effect WISH as it has no debt.

Other WISH specific catalysts:

  • CFO's departure
  • BIG investors exit
  • Slow down (pause) of growth and MAUs down
  • CEO's leaving
  • Down trend causing price to go further down - sentiment, margin call, tax harvesting and few others.
  • Meme tag

And finally some noise:

  • Negative short articles all over (by shorts)
  • Lawsuits (mostly fake)
  • High short selling (by short term traders)
  • Insiders selling (no real selling - almost all of them are for tax purpose to cover RSU)

Now, can WISH recover?

Absolutely ! Go look at NIO, ETSY, TSLA, AMD and even AMZN - you can find many. It may take some time since there are ton of attractive companies to invest in right now - let's just take BABA for example; I believe it should be trading at 3x today. But I am staying put at WISH because I believe BABA can't 10x and WISH has that potential. Here's why:

  • Has been built over a period of decade and over $2 billion has been invested in the business (including advertisings) before IPO money. Go look at CrunchBase - there were many rounds of investing and many investors invested over $5b valuation level before 2015. As everybody knows WISH was offered by AMZN and BABA $10 billion in 2015.
  • 500 million plus downloads in Google play store with about 14 millions over 4 star reviews! Over 2.4 million positive reviews on Apple Store, top 5 e-commerce global platform in many countries - Can you believe it? $1 billion enterprise value with $1.2 billion hard cash? Compare that to Aliexpress and other e-commerce platform.
  • Came from IPO and not SPAC route. When companies go for IPO, due diligence/valuation is little strict compared to SPAC deals as the Banks have to underwrite. It was valued at $24 a share. At the time JPMC and few others have $30 PT for 2021. Business has actually improved a lot since then if we forget growth for a min which is proportionate to Ad spending.
  • Is a global e-commerce platform and not US only like ETSY, Wayfair, Overstock etc.. It's not cheap to build a global e-commerce platform so there is a significant barrier of entry.
  • Has its own business segment that no US/Western company has - serving low to middle class value seeking customer base. Since it is global, it has huge potential to penetrate into India, Brazil and African markets as well. Look at Flipcart (India), MercadoLibre (brazil), Jumia (africa) - WISH do not need to win anywhere, just a small slice of cake is more than enough to increase revenue significantly!
  • Has now built its own logistics business - $1 billion revenue is not a joke! Imagine small merchants being able to ship worldwide effortlessly! Most of the third world countries have copyright issues/fake product issues - they are willing to spend higher if they can buy authentic Nike shoes for example.
  • Has $1.2 billion in cash and no debt. Over the period of last 6 months I have investigated many companies and I haven't seen any companies in WISH's size to have that much money with no debt AND this level of Revenue ! Inflation and rising interest rates are no problem for WISH. I've read people's concerned about cash burn, but that's going to be stabilized starting this quarter. $1 billion is a lot of money to spend for growth! It can even buy small companies to diversify its business, invest in new technology and even buy it's own share (its highly unlikely for growth companies though). WISH actually has already been working on WISH clips, live shopping and new influencer led businesses. I believe 1Sansome has potential to be a billion dollar business in no time ! Go look at SHEIN -I encourage people to compare SHEIN and 1Sansome website. SHEIN is now a $10 billion dollar business.
  • Social commerce that WISH is heading into is already more than a $1T business. - https://ark-invest.com/articles/analyst-research/social-commerce-the-next-wave-in-online-shopping/
  • Is promptly acting to align/fix it's business - revamping it's website, introducing video clips/live shopping, fixing merchant/product quality issues, improving shipping time and potentially getting into new business segments - fintech, payment processing, trend shopping etc.
  • Got the best management in place now. Forget Peter - he was an engineer and not a business person. Google was actually run by Eric Schdmit and was brought in by the founders Surgery and Larry. I recognize the charm about founder led companies but he still does own about 20% of the business so he is vested. In fact, he is the one who brought Jackie in. Peter has become millionaire from billionaire so he has the most vested interest in WISH than any of us! and I encourage people to go read Jackie's employment terms - her major compensation starts when the WISH stock reaches $30! Also most of the higher management is paid in RSU so its in their interest to make the company successful and remain with WISH.
  • Has the most cost efficient business model - It doesn't need investment in physical warehouse -WISH Local is now just paused but it has huge potential. It's employee efficiency is highest in the industry - just about 1,000 people running the company VS SHEIN with 10,000 employees !
  • Rising Ad costs are effecting every e-commerce growth companies but WISH's Ad campaign is the most efficient of most of them. In fact Facebook offered $20 million for its Ad algorithm very early on. I've read many posts that WISH Ad campaign is one of the most efficient campaign in Facebook so it would fare better and can remain competitive. They got the best Data science team - look at their patents! It's a data science / AI company as well.
  • Even though WISH's revenue is decreased and MAU's have decreased, it's still very significant - go compare with ETSY. This quarter is important - if it can become close to EBTDA positive with less Ad spending and still manages to maintain 40M active users and about 1.5B revenue, it's already a lot ! I do not see any issues doubling the revenue if WISH can make those customers happy and increase their LTV - 40 millions of `active` customers are a lot of customers.
  • Major competitor is Aliexpress but go try buying something from there and try to return an item or settle an issue! You have to deal with the seller first. WISH no question asked - you even keep your item. Also WISH is growing its merchant base all the world - about 50% are now US based.
  • E-commerce segment is growing fast and would pass $8 trillion by 2025. With fast delivery and last mile delivery solved, traditional competitors like dollar general, five below and even Macy's JCPenny and most will be wiped out or wouldn't be able to compete. WISH should benefit.

Common perceptions:

  • Selling Chinese products => It's not even a point - more than 90% products sold all over the world are from China and it's for a reason - its most cheaper to manufacture products there. Most items Amazon sells are made in China. But the point is WISH is trying to create/promote Chinese brands - Assume a Chinese shoes brand that compares with Nike but half the cost.
  • Selling dildos => Sex toys are billions of dollar business. I don't see negatives there.
  • Selling cheap products -=>it's the main business ! Dollar General has $50 billion market cap alone and there are others - dollar tree, five below and even Japanese Daiso.
  • Selling fraudulent products => It's not WISH selling them, its the sellers. Could you not post anything on facebook marketplace? I am not saying it's not an issue and I think WISH is working hard to discourage/minimize those sellings.
  • Float too high for short squeeze => Look at Nokia; it went up 80% in one day last year - it has 10 times the float of WISH.
  • Cash burn => I would like to point out that companies are not usually upfront about investments. For example google categories them under `New bets`. So investment in 1Sansome for example might be hidden under SG&A ! We do not know what else is out there investment/initiative wise.
  • France ban => I take that as positive and it will be solved soon. WISH was already working on to fix quality/merchant issues - https://merchant.wish.com/documentation/api/v3/reference#tag/EU-Product-Compliance
  • Going to zero => It may go down further but not going to zero. Only companies with debt are in immediate risk of going bankrupt. $1 billion is more than enough to create few startups.

Here are few upcoming catalysts:

  • New CEO => Whoever is brought in, his fortune will be tied to WISH. Also whoever it is, it would be far better than Peter business wise.
  • Fourth Qtr earnings => Cash burn should stabilize and it should be close to EBTDA positive, if not a surprise profit !
  • Website revamp => Hopefully it will fix many issues including having to login ! I also think just a minor fix such as sorting a search results by price, reviews, sales and other metric should drive sales. Right now, I can't sort by specific products that are highest sellers in the category ! Its so dumb :)
  • Video shopping/Live Streaming => This is now big in China - look at Pinduoduo and others. Social commerce is the next BIG thing - a next gen QVC.
  • Potential buyout => I am personally not interested in buyout but its a possibility if it goes further down.
  • Wish standard, Wish access, revamped website, quality control, Wish clip and efficient use of marketing dollar should help return to growth.
  • Also very excited about 1Sansome - I believe its a underdog.
  • Investors who sold for a loss (tax harvesting) might be returning soon. For example I can't imagine why Jack Morris wouldn't buy back WISH at $3 unless he was not true about his WISH investment before.
  • I have a feeling we will see Institutional investment reaching back above 80% when the SEC filings come out this quarter. Vanguard now is the 2nd highest investor and its average is about $8.

Add-ons:

- If share price doesn't reach at least $17 by March 2023, Jackie gets 0. In order to fully vest her RSU price has to be at least $35. If the buyout occurs, stock price has to be at least $17 in order for her to make any money. Please note she is full time - https://www.sec.gov/Archives/edgar/data/1822250/000119312521159033/d124710dex991.htm

Recent hires:

? - CEO

Update 1:

  • I hope 1/11/22 marks the beginning of downtrend reversal.

-

read-time
10 min
4.50
Target Price
7/ 10
Confidence
6-12 Months
Timeframe
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Sentiment
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