Scotiabank lowers Wix.com stock price target to $175 on AI investment costs

Investing.com - Scotiabank lowered its price target on Wix.com (NASDAQ:WIX) to $175 from $255 on Thursday, while maintaining a Sector Outperform rating on the web development platform company. The new target still represents significant upside from Wix’s current price of $101.70, which is trading near its 52-week low of $99.31 and about 59% below its 52-week high of $247.11. InvestingPro analysis indicates Wix is currently undervalued compared to its Fair Value.

The price target reduction comes despite Wix reporting strong third-quarter results that beat expectations across both top and bottom lines, with management raising full-year guidance. Scotiabank noted particular strength in the company’s core platform and acceleration from its Base44 product. The company posted 13.2% revenue growth in the last twelve months, reaching $1.93 billion, with a healthy gross profit margin of 68.5%.

The bank attributed the target cut to shifting market sentiment, as "unbridled AI enthusiasm has gradually been replaced with skepticism about monetization of endless AI investments." This change has pressured margin expectations for Wix as it funds rapid growth within its Base44 platform. This sentiment shift has contributed to Wix’s steep 52.6% year-to-date decline, despite InvestingPro data showing the company is expected to grow net income this year and trades at a favorable PEG ratio of 0.84.

Scotiabank acknowledged this has created tension among Wix’s investor base, with legacy investors who prioritized free cash flow becoming reluctant to support investments in the company’s relatively unproven "vibe-coding" platform. Some bearish investors have criticized the approximately $50 million ARR contribution as insufficient given the margin compression. Despite these concerns, Wix generated $550.7 million in levered free cash flow over the last twelve months, translating to a substantial 10% free cash flow yield.

Despite these concerns, Scotiabank remains positive on Wix’s prospects, arguing "the market is likely underestimating potential revenue contribution from Base44 going forward," especially compared to valuations of competitors like Replit, Windsurf, and Lovable. The bank concluded that while recovery may take time, "the risk/reward at current levels remains attractive." This aligns with Wix’s solid overall Financial Health Score of "GOOD" from InvestingPro, which offers 12 additional ProTips and a comprehensive Pro Research Report on Wix, along with 1,400+ other top stocks.

In other recent news, Wix.com reported revenue of $505 million and free cash flow of $159 million, both exceeding Street expectations. Despite these positive figures, several analyst firms have adjusted their price targets for the company. BofA Securities lowered its target to $170, maintaining a Buy rating. Evercore ISI reduced its target to $160, citing increased marketing expenses and lower gross margin forecasts, while maintaining an Outperform rating. Raymond James set a new target of $150, noting margin concerns but highlighting that Wix.com had a clean beat on earnings expectations. Citizens adjusted its price target to $185, expressing concerns about free cash flow as the company focuses on growth investments. Similarly, Wells Fargo lowered its target to $184, maintaining an Overweight rating due to concerns about the company’s operating income and free cash flow outlook for 2026. These developments reflect a cautious stance by analysts despite Wix.com’s recent earnings performance.

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