I know this is one of several stocks that’s heavily discussed on WSB and I made a decent amount of money from trading call options back in June as I closely monitored what people were discussing and decided to make a small bet hoping for a pop. And it did. I have been waiting for another entry point but given the stock price decline, I am putting my consulting hat to analyze when the right time is for me to enter. I might miss it as I got greedy with few other stocks this year but here is my thought on this.
Take a look at these two below
Here are some interesting facts
- Market cap is $2.5 billion but according to their IR site, they have $2 billion in cash and cash equivalents.
- This means, they are valuing the business at $500 million when they are generating $2.5 billion in revenue
- This makes absolutely no sense!
- In a typical technology valuation, it’s usually 7x sales or some multiples of EBIT
- For simplicity purpose, let’s use 7x sales. This company should be valued at $17.5 billion
- Then, the share price should be $27.72. Yes, that should be the right price.
Why is it not?
Have you ever seen their email campaigns?
It’s an absolute junk. And the landing page is even worse.
Before you start bashing me criticizing their email campaigns and landing sites, let me say this first. These guy are f’ing geniuses! With UX-unfriendly sites, subpar email campaigns and price points of $1 and $5, they are made $2.5 billion in revenue in 2020. Just imagine what they can do if they can optimize campaigns, clean up their landing page and whatever they are selling (with the current inflation), they increase their price a bit more? The results would be monstrous!
And another note, back in 2020, a group of investors and I thought about acquiring Red Lion Hotel as their valuation was very similar to $WISH: lots of cash and their business was valued for very little. What happened to them? Got acquired by Sonesta.
So I see two possible and very likely outcomes.
- Someone will acquire them since their business valued at $500 million, which is extremely cheap, and they have $2.0 billion in cash and cash equivalents
- They will turn their company around and bring the price back up to $27.72
Conclusion: I am a buyer at this level and definitely when and if it gets close to $3.11 (that’s when the Wall St values their business at $0) but do your own DD before making any investment decisions. I think this is too cheap to not add some into your portfolio.
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