On Tuesday, Benchmark maintained a favorable outlook on Wix.com Ltd. (NASDAQ:WIX) shares, reaffirming a "Buy" rating and a price target of $225.00. The firm's stance comes ahead of the company's anticipated earnings report scheduled for the week of November 4, 2023. Benchmark expects Wix.com to deliver third-quarter total revenue and operating income in line with forecasts, along with positive indications for operational expenditure leverage in the fourth quarter.
The analysis by Benchmark suggests that Wix.com could see an acceleration in top-line growth over the next twelve months, driven by several factors. These include an increase in merchant additions through Wix's Studio-led Partner program, up-selling to existing customers, and an expected uptick in Studio bookings. The recent launch of Studio in the third quarter is anticipated to contribute to this growth, albeit modestly at first, as the impact on average revenue per subscription service (ARPS) begins to stabilize.
Benchmark's report also points to sustained momentum from Wix's move up-market, bolstered by artificial intelligence and machine learning capabilities that are lowering entry barriers for enterprise-level software as a service (SaaS) clients. This strategic direction is expected to further propel the company's growth.
The current trading level of Wix.com is noted to be four turns below its two-year average forward-year two enterprise value to free cash flow (EV/FCF) multiple of 21 times. The reiterated price target is based on a discounted cash flow (DCF) analysis.
This target takes a conservative approach, factoring in a free cash flow (FCF) margin for 2024 that is approximately 50 basis points below the lower end of the company's guidance and 180 basis points below Wix.com's target FCF margin of around 29% for 2025.
In other recent news, Wix.com has made significant strides in its performance, particularly in its second quarter earnings and revenue. The company's Q2 bookings saw a year-over-year increase of 15%, reaching $458 million. Revenue also grew by 12% year-over-year, ending above guidance at $436 million.
The robust financial performance has led to various analyst upgrades and downgrades. Cantor Fitzgerald initiated coverage on Wix.com shares with an Overweight rating, while Benchmark and Needham raised their price targets to $225 and $200 respectively, both maintaining a Buy rating.
On the other hand, Piper Sandler downgraded Wix.com from Overweight to Neutral due to valuation concerns, and KeyBanc maintained a Sector Weight rating. These recent developments accompany the completion of a significant $225 million share buyback program by Wix.com, demonstrating its confidence in long-term growth prospects. Moreover, Wix.com introduced an AI theme assistant to streamline website design, providing personalized guidance and real-time suggestions to users.
InvestingPro Insights
Wix.com's financial metrics and market performance align with Benchmark's optimistic outlook. According to InvestingPro data, Wix has demonstrated strong revenue growth, with a 12.85% increase in the last twelve months as of Q2 2024, reaching $1.65 billion. This growth trajectory supports Benchmark's expectation of accelerated top-line expansion.
The company's profitability is also improving, as indicated by an InvestingPro Tip noting that Wix is expected to be profitable this year. This aligns with the operational expenditure leverage Benchmark anticipates. Additionally, Wix's EBITDA growth of 205.63% in the last twelve months suggests significant improvement in operational efficiency.
Wix's market performance has been robust, with a 75.02% price total return over the past year. This strong performance, coupled with an InvestingPro Tip highlighting Wix's high return over the last decade, underscores the company's long-term value creation potential.
For investors seeking more comprehensive analysis, InvestingPro offers 11 additional tips for Wix.com, providing deeper insights into the company's financial health and market position.
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