On Monday, Evercore ISI updated its outlook on Wix.com (NASDAQ:WIX), increasing the stock price target to $200 from the previous $180, while maintaining an Outperform rating. The firm's decision follows Wix.com's first-quarter earnings, which surpassed expectations and showed a positive trajectory in earnings per share (EPS).
The company's recent financial performance is highlighted as evidence of its resilience and its potential for significant leverage and cash flow generation.
Evercore ISI has included Wix.com in its SMid Top Picks list for the past quarter, alongside other companies such as Pinterest (NYSE:PINS), Zillow Group (NASDAQ:ZG), and Magnite, citing Wix.com's product pipeline and pricing strategy as drivers for potential value catalysts. These catalysts include a turn to GAAP profitability, a ramp-up in free cash flow (FCF), and a considerable share repurchase program.
Evercore ISI's analysis suggests that the positive stock reaction may be partly due to increased investor confidence in the company's management and its ability to substantially surpass the Rule of 40 by the year 2025.
The Rule of 40 is a benchmark for tech companies, suggesting that their combined growth rate and profit margin should exceed 40%. Despite the raised guidance for free cash flow, current market estimates are not fully aligned, projecting approximately 39% revenue growth and FCF margin for 2025.
The firm believes that while there may be limited room for a significant re-rating of Wix.com's stock value, there is solid support for the stock to continue its growth. Trading at 23 times Evercore ISI's 2024 FCF estimate, the expectation is that these multiples will remain stable or improve through the next year.
The revised $200 stock price target set by Evercore ISI is based on a 22 times enterprise value to EBITDA (EV/EBITDA) and 25 times enterprise value to FCF (EV/FCF) on projected 2025 estimates, reflecting a positive outlook for Wix.com's financial future.
InvestingPro Insights
Wix.com's recent first-quarter earnings report has caught the attention of investors and analysts alike, with Evercore ISI raising their price target and maintaining a positive outlook on the company's stock.
To add context to this optimism, InvestingPro data indicates that Wix.com has a market capitalization of $9.35 billion and is trading at a high P/E ratio of 286.26, which reflects investor confidence in the company's growth prospects. The company has experienced a substantial 73.75% one-year price total return, underscoring the high return over the last year that investors have enjoyed.
InvestingPro Tips highlight that analysts are predicting Wix.com will be profitable this year, which aligns with Evercore ISI's positive sentiment. Moreover, the company's trading near its 52-week high, with prices at 97.93% of this peak, suggesting a strong market position.
For those considering an investment in Wix.com, there are 12 more InvestingPro Tips available, offering a deeper dive into the company's financial health and market performance. For those interested in these insights, using the coupon code PRONEWS24 can secure an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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