By Michael Elkins
Piper Sandler upgraded Wix.com (NASDAQ:WIX) to an Overweight rating (from Neutral) and raised their price target on the stock to $120.00 (from $99.00).
The analysts wrote in a note, “We are flipping from value to growth across our digital presence coverage. Post-4Q22, we believe we are entering a new era where 1) growth headwinds for post-COVID subscription cohorts are coming to a close, 2) price increases are fueling growth without sizable offsetting churn, 3) the profitability delta between the top & bottom players in the space is set to compress to a narrower range than ever before.”
Less than a year ago, Piper Sandler downgraded growth and upgraded value in the digital presence space. The move was based on the thesis that the 'growthiest' assets would be structurally challenged as merchant growth slowed and the anniversary of U.S. stimulus would lead to higher churn from larger-$ COVID cohorts. However, as of today, growth headwinds for post-COVID subscriptions are coming to a close, and growth is now being fueled by price increases.
Jeffries believes that WIX’s growth estimates have bottomed, and Piper Sandler estimates that with planned OpEx improvements, the company can reach $425 million+ FCF in CY25.
By 2025, Jefferies sees WIX surpassing $6.50 in FCF/share, only a small delta from FCF leader: GDDY's estimated $7 FCF/share this year.
Shares of WIX are up 7.38% in afternoon trading on Tuesday.