WIX Stands Steady on Unique Business, with More Room to Run

WIX Stands Steady on Unique Business, with More Room to Run


Wix.com (NASDAQ: WIX) is one of the leading carriers in the DIY web development market, providing a cloud-based platform suitable for use by web developers and designers of all levels of experience. The platform has about 165 million registered users and uses exclusively its freemium-based business model to transfer non-paying registered users to premium subscriptions.

The company recently reported quarterly results, which showed strength on the top line, while not meeting expectations for results. In addition, the guidance provided by management was weaker than expected, given the headwinds of the Russia-Ukraine conflict, as well as currency fluctuations.

The positives

However, after the company celebrated its Analyst and Investor Day on May 19, Needham analyst Bernie McTernan decided to bolster its stock rating. He believes that Wix’s strength in the DIY web design industry and its growing popularity among design agencies will help drive the adoption of its online solutions, thereby increasing its value.

In addition, the growing adoption of new tools designed by existing users is increasing Wix’s annual recurring revenue, which is encouraging.

McTernan was encouraged by Wix’s “broad-based approach to user acquisition”, leveraging its freemium-based model, which the analyst believes is “attractive to both the value-creating lens and the for marketing efficiency “.

In addition, the analyst also noted the penetration of small and medium-sized businesses in the DIY web design market and sees a strong bullish potential of companies moving to digitization and switching from existing domains.

It’s important to note that McTernan was very positive about Wix’s consumer base being “relatively inelastic,” meaning companies will continue to update their websites despite any price changes, simply to boost their business. This means that the opportunities for monetization through its consumers are largely sustainable, which could contribute to Wix’s long-term growth trajectory.

Points to watch out for

However, given external headwinds, such as geopolitical tensions and the resurgence of COVID-19 in China, McTernan maintained a more conservative medium- and long-term revenue outlook. The analyst also kept its expectations of targeting gross margin low in the medium term, as it is still looking for stronger signs of margin recovery before raising its outlook.

“The next 18 months should be important for WIX with the expectation that they will benefit from a return of the top of the funnel, as well as indications of the ability to expand gross margins,” he said. McTernan.

The analyst set a target price of $ 85 on WIX shares.

Wall Street weighs

Wall Street also echoes McTernan’s cautiously optimistic sentiment, with a moderate buy rating based on 10 buys, five withholdings and one sale. The average target price for WIX is $ 99.07, which indicates a potential increase of 58.8% from current levels.

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