WISH is more than a short squeeze

Sure SI is high, possible gamma/short squeeze, etc etc. That's all documented in other posts. I want to talk about some other information on this stock. If the squeeze doesn't work out then it's good to hold an undervalued (at current prices) stock right?

Valuation:

Earning is negative as they are still heavily spending and growing

P/S of 1.67 (as of 6/7 closing) is industry low, suggesting that they are undervalued (compared to AMZN 3.82, BABA 5.2, PDD 13.8, EBAY 3.92, ETSY 10.54, W 2.27)

numbers from the latest 8-k and 10-q:

Revenue $772m, up 70% Q/Q. Wish is spending heavily on sales and marketing, $470m last quarter (61% of revenue). They have been consistently spending ~60% to 70% of revenue on sales and marketing, and they anticipate reducing this to 40-45%, at which point they will likely be profitable. Comparing to ETSY for example, ETSY is only spending $151m out of $551m revenue (27%) last quarter. Of course ETSY is in the black – they are just not spending as much to grow. Meanwhile ETSY has a $21.6B valuation on $2B sales compared to WISH's $5B valuation on $2.87B sales.

One of the concerns cited by analysts is the drop in monthly active users (MAUs) from 109m to 101m Q/Q. The explanation given by WISH is that they decided to de-emphasize in emerging markets due to logistic issues during the pandemic. But I anticipate that they will ramp back up. For example WISH recently partner with the south african postal services, indicating that they are going back to growth in emerging markets.

Balance book:

WISH has $1.6B cash. ~$2B total assets, ~$1.1B total liabilities, giving $930m equity. For a growth company these numbers are excellent. Again comparing to ETSY, $1.16B cash, $2.5B total assets, $1.8B total liabilities, $684m equity.

Insider selling:

Another concern that a lot of people have is the amount of insider selling. First of all, it's normal for insiders to cash out for a new IPO company like this. This is certainly done with scheduled sales – they wouldn't want to sell at like 30% of IPO prices either but they couldn't change the scheduled sales. This on top of short seller has driven the prices to <50% of IPO prices, <30% of ATH. I think the insiders would certainly be reconsidering their next selling schedules, and we may see less selling pressure.

Technicals:

Again, the stock is near all time low, and at <50% of IPO prices, <30% of ATH. The spike today poked out of a descending wedge and a breakout looks very promising.

Conclusions:

From a pure price point of view, it's an excellent entry point into WISH, even after today's spike. I think this is a low risk, high reward play at it's current price. In the bull case, WISH gets a valuation similar to ETSY, and that would make WISH have a market cap of $25B for a share price of $40. For the bear case, I don't see how WISH can drop much more. Let's say it goes to $5, that would make it have a market cap of $3B with a P/S of ~1, and that would be absurd.

submitted by /u/CMScientist
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