My $WISH Thesis
Wish has been getting hammered since their IPO and I decided now was the time to pick some up—2.67% of my holdings. A few reasons why:
- Thematically, I think the idea of an online value and discovery retail experience (i.e. TJMaxx, Ross, etc) is an overlooked and underserved opportunity on the internet. Many investors don't like to shop this way but LOTS of consumers do.
- The share price is down 80% from its 52-week high so I think there's some good value here.
- With a 0.93 EV/Revenue multiple, I can't see the price going much lower. They also have $1.6B in cash on hand so going much lower puts EV below revenue run-rate + cash.
- Management offered weak Q3 guidance that should be hard for them to miss based on current user numbers, global downloads, and AOV trending upward.
- Yes, Wish saw a 13% reduction in app installs and 32% reduction in marketplace revenue in Q2 but was still the #4 most downloaded shopping app globally in H1 2021 and reported 90M MAUs for Q2.
- It was easy to disappoint on YoY comps because 2020 was a bonkers e-commerce year.
- Apple's iOS 14.5 changes obviously hurt their user acquisition strategy, which was based on digital advertising, but I think this setback will create a more diversified user acquisition/retention strategy in the long run and they've already started laying the foundation for a nice flywheel based on e-commerce logistics.
Wish's Flywheel
- Use their logistics platform to increase # merchants, inventory, availability, and assortment on the platform. Which will attract more customers.
- Attract and retain value-conscious consumers with a robust assortment of low-cost goods, decreasing time-to-door (TTD), and high availability.
- Use increasing customer base and last-mile logistics platform to attract merchants in higher average order value (AOV) categories such as grocery and consumer packaged goods.
- Bonus: Retain users via financial services such as merchant or consumer financing, stored value based on purchase behaviors to incentivize loyalty (Wish Cash), etc.
Wish Logistics
I won't dive into the full flywheel but wanted to share why logistics is the key to Wish's future growth:
Logistics as a Platform:
- Wish can offer their logistics to merchants selling on their marketplace or as a third-party provider for merchants selling elsewhere. As a third-party logistics vendor, they can more easily entice the merchants to list products on Wish as well, increasing assortment, availability, and time to door (TDD). Wish's CEO, Peter Szulczewski, explains more here.
Wish Local:
- Last-mile logistics are hard and this is where Wish is building out its biggest moat and long-term value driver.
- They have 50K merchants on Wish Local, which are merchant locations that receive customer deliveries—acting as a distributed fulfillment center with no CAPEX for Wish.
- Consumers benefit by getting lower costs and access to faster shipping times by selecting a local "pick-up" center as their delivery option.
- This option is gaining traction: 25% of orders in markets such as Mexico and Italy are done through Wish Local.
Other Logistics:
- 90% of orders are shipped through some version of Wish's logistics platform:
- Wish's logistics system helps standardize the merchant experience, driving down TDD and often allowing Wish to verify products before they're shipped to customers. Shipping times and product veracity/quality are the biggest customer complaints.
- Fulfillment by Wish allows merchants to forward-deploy inventory (usually from China to local markets), which increases availability and decreases shipping time.
h/t to Avory Research for this amazing analysis of Wish and to @turner for the general bullishness on the company.
X (formerly Twitter)
Turner Novak 🍌🧢 (@TurnerNovak) on X
Recent moves:
- Bought more WISH and SFIX today (2% each)
- ~0.5% into Sept 2021 PDD calls last week. Probably should have gone further out into Q4 but 🤷♂️
Any good entry price for this ? It has been consolidating around 5 for sometime now. No big whales I guess
