Benchmark, a financial analysis firm, raised the price target for Wix.com (NASDAQ: NASDAQ:WIX), a leading cloud-based development platform, to $225 from the previous target of $210.
The firm maintains a Buy rating on the stock.
The adjustment comes as Benchmark increases its forecasts for Wix.com's free cash flow (FCF) for the years 2024 and 2025, by 6% and 4% respectively. This places their projections slightly below the company's own FCF margin guidance for 2024.
Benchmark's analysis suggests that Wix.com's FCF margin for 2025 will be at 27.2%, which is under the company's soft guidance of approximately 29% year-over-year growth. This conservative estimate is made despite Wix.com's expectation of revenue acceleration in the second half of the year, driven by the momentum of its Studio product among the Supply Chain (SC) and Partners segments.
The firm views the company's bookings guidance as particularly conservative, indicating a potential deceleration in the second half of the year, despite signs pointing towards revenue growth in 2025.
The report highlights that the Studio and AI innovations are positively impacting both SC and Partners segments, with the latter showing a quarter-over-quarter increase of 220 basis points on a two-year stack.
Wix.com reported a 12% year-over-year increase in Q1 2024 revenue, reaching $420 million. This strong performance led CFRA, Benchmark, and RBC Capital Markets to raise their price targets for the company.
However, Piper Sandler downgraded Wix.com from Overweight to Neutral due to valuation concerns. In addition, KeyBanc initiated coverage on the company with a Sector Weight rating, indicating a valuation based on 5.5 times the fiscal year 2024 estimated enterprise value to sales.
Wix.com also completed a significant $225 million share buyback program, repurchasing around 3% of the company's total outstanding shares. This action underscores Wix's commitment to its financial strategy and confidence in its long-term growth prospects.
InvestingPro Insights
As Wix.com (NASDAQ:WIX) continues to capture the attention of analysts and investors, real-time data from InvestingPro provides additional context to Benchmark's optimistic outlook. The InvestingPro Data points to a significant revenue growth of 12.85% over the last twelve months as of Q2 2024, with a robust gross profit margin of 67.68%, underscoring the company's ability to monetize its offerings effectively.
Moreover, Wix's aggressive share buyback program, as highlighted in one of the InvestingPro Tips, suggests that management is confident in the company's value and future performance. Coupled with the expectation of net income growth this year, these insights may bolster investor confidence in the company's financial health and strategic initiatives.
While Wix is trading at a high earnings multiple with a P/E ratio of 124.76, the company shows a strong return over the last year, with a price total return of 71.81%. This aligns with Benchmark's raised price target and suggests that despite a premium valuation, the market is recognizing Wix's growth trajectory and potential for continued expansion.
To explore further insights and tips, including the six analysts who have revised their earnings upwards for the upcoming period, investors can visit InvestingPro for additional expert analysis. With a total of 14 InvestingPro Tips available, those interested can gain a more comprehensive understanding of Wix's financial landscape and make informed decisions.
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