WIX - Wix gets upgrade at Benchmark on GAAP profitability inflection point

2023-08-04 09:31:22 ET

Benchmark upgraded Wix.com ( NASDAQ: WIX ) on GAAP profitability inflection point, with a price target of $120 on the stock.

Benchmark analysts said that Wix's Q2 GAAP profitability marks an inflection point for the stock lending trust to the company's ability to realize a 25% FCF margin in '25E.

The company's management's focus seems to have prudently shifted from pursuing unsustainable above-average industry growth to a sustainable balance of revenue growth and profitability, the analysts added.

This inflection gives the analysts confidence that the company can attain and more importantly sustain GAAP profitability in '25E, and maybe sooner depending on macro conditions.

The analysts added that they could see a H2'23E profitable trajectory with more strategic direct marketing expenditures, further indicating GAAP operating income profitability could be achieved in '24E.

The firm noted that after a noticeable change in strategic marketing focus, it is clear Wix will focus its funds towards new products, such as Studio, coinciding with less waste on top of funnel marketing relative to historical.

Self-Creator revenue increase of +6% Y/Y ended four consecutive quarters of 2Y stack declines (Q/Q) indicating stability into H2'23E. Partners revenue grew +35% Y/Y and sequential growth of +11% indicates Wix is gaining, not only sustaining, agency positioning relative to peers, according to the analysts.

Based on this renewed focus and better than expected results/outlook, the firm has raised expectations for the company's revenue and the bottom line as it anticipates to see a '24E/'25E GAAP EPS of $0.54/$1.45, respectively.

The firm also increased its  '23E revenue outlook for Wix  +4% after Q2/Q3E's better than anticipated results/outlook, noting +3%/+5% revisions to Creative Subscriptions and Business Solutions revenue, respectively.

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