ContextLogic (NASDAQ:WISH) is well-positioned to benefit from the turbulence that China-based e-commerce companies are facing. Further, after outlining multiple, positive catalysts in my previous column on WISH stock, published on June 28, I have identified several more drivers that are likely to boost the shares over the longer term.

Among these are ContextLogic’s innovative merchant recruitment program, the huge potential of its e-commerce niche, the rapidly improving quality and revenue of its logistics service and its revenue from advertising that has needle-moving potential.

Chinese E-Commerce Giants’ Problems Should Help ContextLogic

As I noted in my July 19 column on Alibaba (NYSE:BABA) stock, the e-commerce giant has drawn the wrath of China’s government, and Beijing has taken extensive action against it. The situation appears to have been sparked by a November 2020 speech by Alibaba founder and former CEO Jack Ma in which he criticized China’s financial system.

I believe that Ma’s deviation from Chinese norms sparked Beijing to consider the risk posed to it by large tech companies in general and huge tech firms with direct access to tens of millions of consumers in particular.

Based on its actions thus far, China’s government appears to believe that its rule could be threatened by tech companies that are in both categories, i.e., those that have huge amounts of money and can communicate directly with many tens of millions of consumers.

Unfortunately for the large China-based e-commerce companies, including Alibaba, JD.com (NASDAQ:JD) and Pinduoduo (NASDAQ:PDD), they are in both of these categories.

Although it’s based in the U.S., ContextLogic nonetheless recruits many of the merchants on its platform from China. With the large China-based e-commerce companies likely facing extended periods of regulatory crackdowns, their management teams will probably be quite distracted and may very well look to downsize and raise their margins. Those actions would allow them to lower their profiles without sacrificing much profitability.

Such developments, in turn, would likely result in ContextLogic being able to recruit many more China-based merchants, making its e-commerce platform much more appealing to consumers. Additionally, ContextLogic may be able to make deals on more favorable terms with Chinese merchants.

The Huge Potential of the WISH Stock Niche

With ContextLogic’s Wish Local program, brick-and-mortar stores are paid by the e-commerce giant to offer their products on the Wish e-commerce platform. This initiative is a so-called “loss leader” for ContextLogic, as the company pays out fees to the brick-and-mortar retailers, but does not get any revenue from them in the context of the online transactions.

However, ContextLogic uses the program to market and sell its rapidly growing logistics services to participants in the Wish Local program. What’s more, the products offered by the participating stores makes the Wish website more attractive to consumers, ultimately increasing the website’s user metrics and revenue.

Meanwhile, ContextLogic appears to be a global leader in the discount e-commerce niche, which looks set to be a truly blockbuster category. According to the company, more than 1 billion households on earth make less $75,000 annually. And ContextLogic also points out, with some justification, that “traditional ecommerce overlooks value conscious shoppers.”

Also very upbeat on the niche and on WISH stock is InvestorPlace’s Luke Lango, who said in his July 19 column, “Sooner or later, some platform will emerge as the Amazon.com of discount shopping. We believe Wish.com will be that platform.”

Rapidly Growing, Improving Logistics and High-Potential Ad Sales

ContextLogic’s logistics sales surged an incredible 338% year-over-year, reaching $245 million. In his July 24 column, InvestorPlace contributor Tom Kerr wrote about ContextLogic, “In Q1 2021, delivery times and delivery-related refunds were both at all-time lows, with delivery-related refunds down 43%.”

As noted by a Seeking Alpha contributor, “ProductBoost is a $50M-a-quarter business for ContextLogic and the ad business could easily become a $100M-a-quarter revenue opportunity for the e-Commerce platform as post-pandemic ad spending recovers.”

The Bottom Line on WISH Stock

ContextLogic is poised to benefit from the Chinese tech crackdown, while the company has many other strong, positive catalysts and is a major player in a very attractive niche.

Yet WISH stock is trading at a forward price-to-sales ratio of around 1.5 based on analysts’ average 2022 sales estimate. As a result of these points, long-term investors should buy WISH stock.

On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

Larry has conducted research and written articles on U.S. stocks for 14 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Among his highly successful contrarian picks have been solar stocks, Roku, and Snap. You can reach him on StockTwits at @larryramer. Larry began writing columns for InvestorPlace in 2015.