Based in San Francisco, ContextLogic (NASDAQ:WISH) ships out cheap products to consumers who buy them online. Speaking of cheap, WISH stock is low-priced, but don’t get stuck in a value trap. There’s not much value to speak of here, as WISH stock could actually get much cheaper.

At first glance, ContextLogic’s business model might sound reasonable. After all, e-commerce is big business. Additionally, cheap products should be in demand during times of high inflation.

It all might seem logical, but as they say, the data doesn’t lie. There’s a huge gulf between theory and practice as ContextLogic’s concept hasn’t translated into revenue growth. Worse yet, the company remains unprofitable and appears to have a dwindling capital position.

What’s Happening with WISH Stock?

Back in late January of 2021, WISH stock made wishes come true as it spiked to $30. All hopes of a sustained rally were soon dashed, however, as the ContextLogic share price embarked on a prolonged journey toward $1.

There were brief share-price rallies along the way. Occasionally, people would refer to ContextLogic as having meme-stock potential. For the long term, though, investors should think about owning a stake in a company and not just dream of memes.

WISH stock hasn’t reached $1 quite yet, but it seems to be heading in that direction. If the stock does fall below $1 and stays there for a prolonged period of time, don’t be surprised if the Nasdaq exchange issues a warning to ContextLogic and possibly even a delisting threat.

Why have ContextLogic’s investors been subjected to such distress? Mainly, it’s because shoppers don’t just want low prices. They also want decent quality. Unfortunately, ContextLogic has a reputation for compromising on product quality. As we’ve pointed out previously, an investigation by French regulators found that 45% of toys ordered from Wish were determined to be dangerous. Moreover, 95% of electronics sold on the Wish platform failed to meet European standards and 62% of jewelry items ordered off Wish were considered dangerous.

Improving, but Still Not Good

In ContextLogic’s case, a flawed business model isn’t likely to produce encouraging financial results. Thus, we come upon the company’s first-quarter (Q1) 2022 results, which tout “improvements” that are worrisome.

When it came to year-over-year revenue results, ContentLogic didn’t demonstrate any improvement at all. In Q1 2022, the company’s Logistics revenues were down 65%, Product Boost revenues were down 72%, Core Marketplace revenues (ContextLogic’s bread and butter) were down a whopping 81% and total revenues were down 76%.

Meanwhile, two metrics that demonstrated “improvement” were ContextLogic’s adjusted EBITDA, which showed a loss of $40 million, and the company’s net earnings loss of $60 million. In other words, ContextLogic is still unprofitable.

Regarding the company’s capital position, ContextLogic’s Q1 2022 cash flows from operating activities were negative $146 million and free cash flow was negative $148 million. Furthermore, ContextLogic’s cash and cash equivalents declined from around $1 billion as of Dec. 31, 2021, to $760 million as of Mar. 31, 2022.

What You Can Do Now

It would be disastrous for WISH stock to break below the crucial $1 level. Yet, this almost seems like an inevitable outcome. Judging by multiple financial metrics, ContextLogic’s business is failing.

This just goes to show that not all e-commerce companies are worth your investment capital. So, don’t succumb to fantasies about ContextLogic rewarding its loyal shareholders. The reality is that not all wishes are destined to come true.

ContextLogic currently scores a grade of “F” in my Portfolio Grader.

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.