$WISH Analysis: 7/9/21
Fundamental and Technical Analysis of WISH as of 9 July, 2021
WISH (ContextLogic Inc.) is a global eCommerce platform that was founded in 2010 and its headquarters is located in San Francisco. WISH went public through an IPO in December at $20 per share and saw a move up to $32 by February before selling off down to $7 in June.
There has been a lot of meme talk this year across Reddit and Twitter that have sent those stocks much higher regardless of the company’s financial situation. While I have been a part of some of them with a follow-the-flow mindset to make a quick buck, I found it very interesting when WISH started to get a lot of buzz, but ultimately has only gone down since interest started rising. I am very bullish on WISH from a valuation standpoint and truly believe the company will see an incredible return for those who can be patient.
The main reasons behind my Bullish outlook on WISH are below.
Hired technology veteran Jacqueline Reses in May as Executive Chair.
Capital Lead and Executive Chair of Square Financial Service at Square from 2015-2021
Chief Development Officer at Yahoo from 2012-2016
On the board of directors of Ali Baba (BABA) from 2012-2014
VP of Goldman Sachs from 1992-1999
Involved in many profitable eCommerce startups throughout her career
It is important to note that her salary from WISH is only 36k/year and much of her compensation from WISH is tied to bonuses that will trigger if WISH's stock price improves. These bonuses begin at $25 and fully vest at $36!
Financial positions have improved over the last few quarters
$1.6 billion in cash on hand at the end of Q1 with very little debt
Revenue and Customer Growth
The recent Q1 shareholder newsletter highlighted the incredible growth from the logistic business which was killing their margins in the past has increased 338% YoY. In addition to this growth, WISH also saw their revenue from the marketplace grow 40% YoY up from 24% in Q4 of 2020.
Other key metrics include:
Revenue per active buyer YoY growth up 76%
Marketing expenses for Q1 down to 60% from 67% in Q1 of 2020 and 70% in Q4 of 2020
Recent approval for payment institutions license for the EU provides room for faster growth.
I could go on and on about the improving financials that WISH is seeing, but as we approach earnings on 11 August, I will hold any further analysis to see how the results compare to the current guidance.
WISH Technical Analysis
Since the buzz began on WISH we have seen some volatile movements with a few pops up to 15 before a steady decline over the past two weeks. It appears now that the initial buzz and hype has subsided the chart appears to have found a bottom (at least for now). There is still an unfilled gap from May 14th down to $10.15 and we could very well see one more flush down to touch that before earnings in August.
Starting with a look at a clean chart since the IPO back in December
You can see the steady decline from 1 Feb until it started getting meme attention on Twitter and WSB in early June when volume skyrocketed. Since June 27th when the price touched 15.18 it continued to sell off until July 7th where it looks to potentially have found a bottom.
From here I want to walk you through my process of evaluating WISH from a technical standpoint. First, by simply applying the raindrop candles on Trend Spider, we can see that sellers have been in control every day from June 29th until 7 July. On July 8-9 buyers began to step in although on lower volume. This could indicate that the price may have found a bottom. However, there is still an unfilled gap down to 10.15 that we could potentially see one more push down to. It is extremely common to see algos push gap fills when they are close so we need to be mindful of that if you are looking to start a position.
Now here is what I don’t like. I normally do not like to take a position when the EMAs are not stacked correctly or have not yet fixed themselves on lower time frames. Looking at the daily and hourly charts with the 8, 21, 50 EMA and 200 SMA turned on they are still incorrectly stacked but they do look to be curling up on the hourly chart. On the positive side, the yearly point of control (POC) is 11.14 which is right where we closed today (July 9th). The yearly VWAP also looks to have leveled out at 12.77 so we could see a short-term push back to that level If buyers remain in control.
Looking at two sets of Fibonacci lines, first looking at a three-point from the last swing high to low to high we can see price sitting right on top of the .786. These Fibonacci lines almost perfectly line up with the volume shelf at every major price point so I would expect these levels to provide some resistance if we begin to move upward. On the bearish side there is not much support below if we fill that gap downward until 9.89 and then 7.87, so keep those levels in mind if support starts breaking down.
The second look I want to show you is the automated trend lines that Trendspider depicts. Using the high from 1 Feb to the low before the gap down on 11 May, we are sitting right at the 0 level of 11.07 which is also close to the POC. As you can see the next fibs up have very little resistance with the first being 16.21. The way I am looking at this is we will need to see price fight through the previous 3 point retracement before we can consider these fib lines as accurate.
Let’s take a look at the options flow over the last 14 trading days. Looking at the flow on Unusual Whales, we can see that overall from the peak on 28 June bullish premium slowly declined until July 6th and then returned to over 50% and continued to increase through the end of today.
Looking at today’s flow, I took off any options purchased for today’s expiration and looked at orders over 30k. Interestingly enough it looks like the whales are targeting leaps heavily today. I like to see this as a potential indicator that there could be a significant move upward happening over time with limited downside risk. Today’s volume was heavy on Jan 22 calls between the 6 and 12 strikes.
Looking ahead to earnings in August, it seems like there is quite a bit of bullish sentiment that the price will be between 10 (sold puts) and 20 (calls bought).
One last thing I want to highlight is looking at the historical volume on the August monthly on the “at the money” $11 strike. As seen with the price leveling out the bid/ask is also shifting but the put OI is decreasing at a faster rate than the call OI, which indicates that long-term sentiment may also be shifting in anticipation of earnings.
So with all that said where do I stand on WISH?
I currently have a position in shares that I started by selling puts at the 13 strike two weeks ago and was assigned. I sold calls for this week and next week at various strikes above my cost basis to bring my overall cost down. I sold this week 12.5 strike which all expired worthless, allowing me to keep the premium and I also have active calls sold at 13.5, 14.5, and 16.5 for next week which I expect to also expire worthless as well. In the event WISH does move higher it will allow me to have a staggered level of profit locked in. I will be watching price action on Monday to potentially sell calls on my remaining shares for the upcoming week and may aggressively target at the money or one strike above as I do not anticipate a large move before monthly expiration.
If you do not have a position in WISH yet, I think this level is an excellent entry point to start acquiring shares. Selling a weekly 11 or 10.5p would also be a safer way to enter and potentially get assigned shares with a lower cost if we chop around and close between 10.5-11 next week. 12 is also a decent option if you can sell it for 1.10 or higher.
My outlook is that as long as the overall market continues in an uptrend, WISH should see its EMAs begin to cross over the next 1-2 weeks before we see a potential run into earnings. I am targeting a push back to around the $14 level before earnings however, I am not looking to sell these shares anytime soon as I am very bullish on WISH into next year.
I will establish a core amount of shares I will be holding for 12 months or more and then adding an additional 25-50% that I will use to swing between key levels.
IV is extremely high since the meme status took over, so there is a higher risk in buying calls especially any that are under 30 days. I would look to buy leaps in WISH and then sell closer expirations calls against them, with the exception of the week before or after earnings unless you are okay with extreme swings on binary events.
I hope this walkthrough was helpful to not only get familiar with the basic fundamentals of WISH but also my mindset in how I am approaching the technical setups. Please keep in mind that with WISH entering meme stock territory it has the potential to defy all logic in both directions but long term I see WISH as a solid investment.
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