What happened
Shares of ContextLogic (WISH -1.63%) were up 20% as of 10:25 a.m. ET on Thursday following the company's third-quarter earnings report. The price jump brings the stock's year-to-date performance to down 75% in 2022.
The mobile e-commerce platform reported a loss per share of $0.18 that was slightly below analysts' estimates. The market also shrugged off a bad miss on the top line, where revenue of $125 million was almost half of estimates calling for $212 million.
So what
ContextLogic operates a mobile shopping app that seeks to make browsing more fun, while saving consumers money. The company reported a revenue decline of 66% year over year, which is consistent with prior quarters. But the stock's steep sell-off over the last year already accounts for that weakness.
Most importantly, the company's turnaround effort is making progress, including achieving higher net promoter scores, which places Wish as one of the better-performing online merchants. Year to date through September, refund rates have fallen 34%, and customer order cancellations are down 68%.
Better yet, management reported a sequential improvement in order volumes over the second quarter and a high rate of on-time deliveries.
Now what
ContextLogic is still a risky small-cap stock. After reporting a large loss on the bottom line last quarter, management expects to report another adjusted operating loss between $90 million to $110 million in the fourth quarter.
The company's losses have caused management to use a significant amount of cash on the balance sheet this year, so it's imperative ContextLogic reach positive free cash flow soon. On this note, there was good news, with cash from operating activities narrowing to -$100 million for the quarter -- much better than last year's -$344 million in the same quarter.
Still, investors should be careful with this stock until the business proves it can grow revenue and show a clear path to profitability.
