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On Tuesday, Wells Fargo (NYSE:WFC) analyst Alec Brondolo upgraded Wix.com (NASDAQ:WIX) stock from Underweight to Equal Weight, setting a price target of $176.00. The upgrade reflects a more positive outlook on the company's potential to increase prices in the fiscal year 2026, which is expected to reduce the previously perceived risks to consensus estimates. According to InvestingPro data, while the stock has fallen over 31% year-to-date and appears oversold, analyst targets range from $166 to $300, suggesting potential upside. The company maintains a GOOD financial health score, with strong interest coverage from cash flows.
Wix.com's Studio pricing remains similar to its direct-to-consumer (DTC) product when comparing like-for-like services, excluding one-time items. However, Studio customers are likely to have a greater willingness to pay, suggesting that the monthly subscription price could be significantly higher than that of DTC offerings. Wells Fargo estimates that every 10 percentage point increase in Studio pricing could be 1% accretive to fiscal year 2026 bookings and 2% accretive to free cash flow (FCF). The company's strong pricing power is reflected in its impressive 12.74% revenue growth and robust 67.93% gross margin, as reported by InvestingPro.
The analyst also noted that less than 20% of Wix.com's revenue comes from eCommerce customers, which leans the business mix towards services and reduces macroeconomic risks. At the Citi conference on April 9, 2024, management indicated that half of the gross payment volume is from eCommerce. Using the number of eCommerce merchants as a proxy, the firm calculates that eCommerce accounts for approximately 18% of revenue in 2024. The high mix of business towards events and services is considered to position Wix.com favorably in relation to risks associated with tariffs.
Despite the upgrade, Wells Fargo has not moved to an Overweight rating due to ongoing pressure at the top of the sales funnel. There is a need to observe stabilization in this area before becoming more optimistic. While Wix.com is shifting towards a partner business with higher average revenue per user (ARPU), the relevance of subscriptions and gross additions may decline over time. The analyst highlighted a concerning trend with new visitors to the Wix web builder down 13% year-over-year in the first quarter, compared to a 7% decrease in the fourth quarter, acknowledging that some of the decline is related to a change in the mix of business. A positive signal on volume is needed before the firm considers a more constructive stance. For deeper insights into Wix.com's business model and growth prospects, investors can access comprehensive analysis and 18 additional ProTips through InvestingPro's detailed research reports, available for over 1,400 US stocks.
In other recent news, Wix.com has announced a $200 million share buyback plan, authorized by its Board of Directors, highlighting its confidence in generating substantial cash flow and commitment to enhancing shareholder value. Alongside this, Wix.com has introduced a new automation builder aimed at simplifying the creation of complex business workflows, which could potentially boost customer retention and revenue growth. Analyst firms have shown optimism about Wix.com’s prospects, with Benchmark raising its price target to $260, noting the company’s guidance amidst foreign exchange headwinds. Cantor Fitzgerald also increased its price target to $270, citing Wix.com's fourth-quarter results that met revenue expectations and exceeded free cash flow predictions. Needham raised its price target to $250, maintaining a Buy rating and recognizing Wix.com as a top product-driven growth story, particularly with the anticipated benefits from Wix Studio. These developments reflect a positive outlook from analysts, emphasizing the potential for revenue growth and operating margin expansion. Investors will be closely monitoring Wix.com’s performance, especially with the new products set to launch under the Self Creator segment.
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