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Why ContextLogic Stock Crashed Today

By Joe Tenebruso – Updated Aug 13, 2021 at 5:40PM

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The parent of suffered a sharp decline in its key growth metrics.

What happened 

Shares of ContextLogic (WISH 6.21%) dropped 19.8% on Friday after the e-commerce platform reported disappointing second-quarter results. 

So what

ContextLogic's revenue fell 6% year over year to $656 million. That was far below the $723 million in revenue Wall Street had expected. 

The downturn was driven by a 32% plunge in ContextLogic's core marketplace revenue. The company saw a 13% decrease in app installs and a 15% decline in the average time users spent on its platform as more people returned to stores when the economy reopened.

A downwardly sloping stock chart.

ContextLogic's stock price plunged on Friday. Image source: Getty Images.

Worse still, while ContextLogic's user engagement fell, its advertising costs rose. Management said that Apple's recent privacy changes to its iOS mobile operating system led marketers to shift their spending to Android-powered devices. In a letter to shareholders, the company stated: 

Ultimately, this drove up competition for advertising bids, restrained our ability to reach more users, and increased advertising costs for Wish since most of our growth marketing has been focused on Android, the preferred device for the majority of our users.

All told, ContextLogic's net loss ballooned to $111 million from $11 million in the year-ago period.

Now what

ContextLogic's financial results are likely to deteriorate further in the third quarter. The company said its quarter-to-date total revenue through July was down roughly 40% as it pulled back on its digital-ad spending while working to improve its operations. 

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Apple. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

Stocks Mentioned

ContextLogic Inc. Stock Quote
ContextLogic Inc.
$0.76 (6.21%) $0.04

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