PreMarket Prep Stock Of The Day: ContextLogic

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

For the most part, the IPO market has been brutal in 2021. Whereas in other years, many issues have traded straight up from day one and never looked back, others have rallied out of the gate and then imploded. One of those issues is ContextLogic Inc. WISH.

The Company: ContextLogic is an online shopping store. The store provides personalized products, clothing products, accessories, gaming products and equipment, cosmetics, plastic products, mobile covers, and other products.

Geographically, it derives a majority of revenue from Europe and also has a presence in North America, South America and other countries.

Rough Start And Then A Rally: ContextLogic made its Wall Street debut on Dec. 16 and showed some early promise. After ending its inaugural session at $20.05, two days later it peaked at $24.75 and then hit a seven-day skid that took the issue to $17,58.

After putting in place a series of three lows at the $17.60 area, it mounted a strong rally that didn't peak until Jan. 28 at $32.85 and then reversed course. It backed off that high to end the month at $30.07.

Where Is The Bottom? After failing to hold the $30 level into mid-February, the selling pressure began to mount. It ended the month trading lower in 10 of the last 12 sessions, falling from its Feb. 9 close ($29.53) to end the month at $19.61.

The slide continued in March falling to $15.80 and the pace of the decline eased in April falling to $13.87.

Sell In May And Go Away: The old adage certainly applies to this issue. After peaking just above its month-end closing price at $13.94, the issue had a steady decline and posted its all-time closing low in Wednesday’s session at $11.47.

Huge EPS Loss Trumps Sales Beat: After the close on Wednesday, the company announced a wider than expected loss of ($3.40) versus ($1.91) estimate. Its sales beat ($794 million versus $736.1 million) is being overshadowed by the high EPS miss. The company offered no future guidance.

Price Action: Its much lower open ($10.01 vs. $11.47) has turned out to be only $0.12 from the session high and the issue has continued to make new lows for the session. As of 1:45 p.m., it has fallen to $8.62 and is attempting to regain the $9 handle.

Moving Forward: Without knowing the reason for the huge EPS miss, it's difficult to be bullish on the issue based on its recent price action. From a technical standpoint, if the issue can put in a few lows in the same area and move up from there, investors could attempt to catch a falling knife, using the multiple low areas (when it happens) as a possible exit point if a rally doesn't materialize.