Is Wix.com a Strong Buy after Q2 Results?

As consumers increasingly move to ecommerce, there is a need for dynamic web content and services that would result in a high level of customer engagement.

Wix.com Ltd. (WIX) is a cloud-based website development platform with close to 200 million registered users globally. The company’s platform consists of three web-creation products: Wix ADI, Wix Editor, and Editor X.

Wix ADI is an artificial-intelligence based solution for website designing. Wix Editor allows registered users to design an unlimited number of customizable websites, while Editor X provides advanced website-design and layout capabilities. (See Wix stock charts on TipRanks)

Q2 Results

The company announced its Q2 results on Wednesday. Wix posted revenues of $316 million, up 34% year-over-year, coming in ahead of consensus estimates of $311.6 million. Adjusted net loss in Q2 came in at $0.28 per share, narrower than analysts’ expectations of a loss of $0.41 per share. Wix reported an adjusted loss of $0.26 per share in the same quarter of last year.

Avishai Abrahami, co-founder and CEO of Wix commented that the uncertainty created from the COVID-19 pandemic was reflected in the company’s financials, which “came in at the low end of our expectations.”

Furthermore, Lior Shemesh, CFO of Wix stated, “Our second quarter results showed stronger growth than pre-pandemic quarters, although we did face more headwinds in the back half of the quarter than we expected.

“We are adjusting our expectations for the remainder of this year to account for continued uncertainty around the pandemic as well as the timing of B2B partnership agreements.”

In Q3, Wix expects revenues between $311 million to $317 million, while collections are expected to be between $355 million to $365 million. Collections “is a non-GAAP financial measure calculated by adding the change in deferred revenues for a particular period to revenues for the same period.”

For Fiscal Year 2021, revenues are projected to be between $1.25 billion to $1.27 billion, and collections are anticipated to range between $1.4 billion and $1.44 billion.

However, Guggenheim analyst Kenneth Wong said that the FY21 outlook was “well below consensus expectations.” As a result, the analyst lowered his price target from $350 to $260 (27% upside), but reiterated a Buy rating on the stock.

Wix’s Partnership with Vistaprint

On Wednesday, the company announced a partnership with Vistaprint. Customers using Vistaprint for building brand and marketing strategies will soon be able to use the Wix platform.

Wong viewed the Vistaprint partnership and rise in B2B as a “positive” but also opined that “when introduced in the midst of growing uncertainty, investors felt the partnerships only magnified concerns that the ‘core’ Creative business is in decline.”

The analyst did note, however, that constructive investors could view the Vistaprint partnership “as validation of Wix’s strategy to augment growth by moving upmarket to target agencies and B2B partnership.”

Wall Street’s Take

Turning to the rest of the Street, consensus is that Wix is a Strong Buy based on 13 Buys and four Holds. The average Wix.com price target of $280.50 implies 37.1% upside potential to current levels.

Disclosure: Shrilekha Pethe held no position in any of the stocks mentioned in this article at the time of publication.

Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.