On Thursday, Benchmark raised its price target on shares of Wix.com (NASDAQ:WIX) to $250 from the previous target of $225, while maintaining a "Buy" rating on the stock. The decision follows Wix.com's third-quarter results, which the firm believes showcase the company's ability to sustain top-line-driven leverage and consistently scale incremental flow through to free cash flow (FCF).
The analyst noted that Wix.com's management expects to see accelerating revenue growth in 2025, and a similar trend is anticipated for FCF. With the current Free Cash Flow (FCF) margin for Self-Creators (SC) above 30%, the analyst suggests a projected mid-30% to mid-teens FCF margin for SC and Partners, respectively. The firm views the potential shift towards Partners revenue as an underappreciated aspect of Wix.com's leverage story, due to the higher FCF margin profile of Partners compared to SC in the long term.
Benchmark believes that Wix.com's foundational investments within its Partners segment are now complete, providing clear insight into the company's near-term leverage potential. The firm's 2025 estimates indicate that Partners revenue growth will accelerate to 33% year-over-year, compared to 31% in 2024. These projections reflect a deceleration from the fourth-quarter levels in 2025 for both SC and Partners.
Moreover, Benchmark's analysis includes a conservative assumption that the incremental flow through to adjusted EBITDA will decrease in 2026 below 2024 levels. This takes into account the possibility of variable cost growth outpacing top-line growth as Wix.com may face challenges from diminishing AI-related tailwinds and increased competition.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.