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WIX Stock Surges 123% in a Year: Will the Rally Continue?

Wix.com WIX is continuing its upward trajectory, with a gain of 123% in the past year compared with the S&P 500 Composite and sub-industry’s growth of 28.6% and 46.3%, respectively.

Headquartered in Tel Aviv, Israel, and founded in 2006, WIX is a cloud-based web development platform. It offers solutions that enable businesses, organizations, professionals and individuals to develop customized websites and application platforms and grow their online presence.

Solid financial performance has been driving a good run on the trading front. The stock has gained 3% since announcing solid first-quarter 2024 results on May 20.

WIX outpaced estimates in each of the trailing four quarters, delivering an earnings surprise of 56.5%, on average.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Factors Fueling Growth

Increasing adoption of the product portfolio especially various AI products and WIX Studio has been driving WIX’s performance. Higher conversion and improved monetization across the user base are additional tailwinds.

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Among AI products, management highlighted that its key offering — AI Website Builder — was getting strong responses from both Self Creators and Partners. This particular solution creates a professional website that meets the user’s requirements through a conversational AI chat experience.

Regarding WIX Studio, management noted that over one million Studio accounts have been created by agencies and designers since the rollout of this product in August 2023. The rapid conversion of these new accounts has led to more Studio premium subscriptions than expected. WIX Studio also contributed to strong revenue growth from the Partners business.

The average revenue per subscription is being driven by an expansive product portfolio and strong commerce growth.

WIX’s first-quarter total revenues increased 12% year over year to $419.8 million and beat the Zacks Consensus Estimate of $417.7 million. Non-GAAP earnings per share (EPS) of $1.29 exceeded the Zacks Consensus Estimate of $1.03. The company recorded EPS of 91 cents in the year-ago quarter.

Creative Subscriptions’ revenues (75.6% of total revenues) increased 9% year over year to $304.3 million. Business Solutions’ revenues (24.4%) rose 20% to $115.5 million.

Bookings of $457.3 million improved 10% year over year. Creative Subscriptions’ bookings increased 7% year over year to $334.6 million. Business Solutions’ bookings rose 21% to $122.6 million.

Solid growth in bookings and revenues led to strong free cash flow performance. Free cash flow was $105.7 million compared with $25 million in the year-ago quarter.

Apart from strong product traction, improving business fundamentals and a positively-trending macro environment led WIX to upgrade the outlook for bookings, revenues and free cash flow for 2024.

Total bookings are expected between $1,796 million and $1,826 million, compared with a previous range of $1,784-$1,813 million.

Total revenues are now expected to be in the range of $1,738-$1,761 million (previous projection:  $1,726 million to $1,757 million).

Free cash flow, excluding headquarter costs, is expected between $445 million and $455 million, or approximately 26% of revenues in 2024. Earlier, free cash flow was expected in the range of $370-$400 million, or 21% to 23% of revenues.

Headwinds Persist

However, unfavorable foreign currency movement and rising accumulated deficit are headwinds.

Increasing investments in product development, infrastructure and platform along with stiff competition in the e-commerce marketplace remain concerning for this Zacks Rank #3 (Hold) stock.

Estimate Revision Activity

The Zacks Consensus Estimate for WIX’s 2024 and 2025 revenues is pegged at $1.75 billion and $1.98 billion, indicating growth of 12% and 13.4% from the year-ago levels, respectively.

The consensus estimate for 2024 and 2025 EPS is expected to rise 8.7% and 36.3% from the prior-year actuals to $4.77 and $6.50, respectively.

The long-term earnings growth rate is 25%.

Stocks to Consider

Better-ranked stocks worth consideration in the broader technology space are Badger Meter BMI, Oracle ORCL and The Descartes Systems Group Inc DSGX. While BMI sports a Zacks Rank #1 (Strong Buy), ORCL and DSGX carry a Zacks Rank of 2 (Buy) each, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for BMI’s 2024 EPS is pegged at $3.89, up 9.9% in the past 60 days. BMI’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 12.7%. The long-term earnings growth rate is 15.6%. Shares of BMI have risen 41.7% in the past year.

The Zacks Consensus Estimate for ORCL’s fiscal 2025 EPS is pegged at $6.15. The long-term earnings growth rate is 11.2%. Oracle’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 3.6%. Shares of ORCL have risen 26.4% in the past year.

The Zacks Consensus Estimate for Descartes’ fiscal 2025 EPS has increased 1.2% in the past 60 days to $1.69. Descartes’ earnings beat the Zacks Consensus Estimate in two of the last four quarters, while missing in the remaining two quarters, the average surprise being 5.1%. Shares of DSGX have risen 28.8% in the past year.

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Badger Meter, Inc. (BMI) : Free Stock Analysis Report

Oracle Corporation (ORCL) : Free Stock Analysis Report

The Descartes Systems Group Inc. (DSGX) : Free Stock Analysis Report

Wix.com Ltd. (WIX) : Free Stock Analysis Report

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