On Tuesday, Benchmark raised the price target for Wix.com (NASDAQ:WIX) to $210 from $175 while maintaining a Buy rating on the stock. The adjustment follows Wix's first-quarter results, which surpassed expectations, and the company's updated financial outlook that suggests increased operational leverage.
The company's updated free cash flow (FCF) margin guidance for 2024 has been increased by 400 basis points to 26.0%. This revision is based on the anticipation of year-over-year revenue growth in 2025, driven by a second-half booking inflection within its Self Creators and Partners segments.
Wix's management attributes the expected growth to new artificial intelligence product launches that should enhance subscription conversions, as well as a stronger-than-anticipated contribution from Studio that has been attracting larger merchants and boosting Partners bookings.
Wix's 2024 revenue guidance has been formulated with the assumption that subscription conversion rates from Studio and AI integrations will not improve from first-quarter levels. This conservative stance indicates that the bookings guidance for 2024 may be understated, presenting a potential revenue catalyst for 2025.
The company's current trading valuation is approximately 17.8 times its estimated 2025 enterprise value to free cash flow (EV/FCF), which is below its three-year average of 25.0 times. The firm believes that with the emerging near-term topline catalysts, there is still attractive upside in Wix's shares. The new price target is based on a discounted cash flow (DCF) analysis.
InvestingPro Insights
With Benchmark's optimistic outlook on Wix.com following their first-quarter results and increased free cash flow margin guidance, let's consider some additional insights from InvestingPro. Wix's market capitalization stands at a robust $9.4 billion, reflecting investor confidence. The company's revenue has grown by 13.18% over the last twelve months as of Q1 2024, indicating a solid trajectory in its financial performance.
InvestingPro Tips suggest that net income is expected to grow this year, which aligns with the company's positive financial outlook. Additionally, three analysts have revised their earnings upwards for the upcoming period, hinting at a potential bullish sentiment in the market. However, the stock is currently trading at a high earnings multiple, with a P/E ratio of 118.54, and is near its 52-week high, suggesting that it may be priced at a premium.
For readers interested in a deeper analysis, there are 17 additional InvestingPro Tips available, which can provide further insights into Wix's performance and valuation. To explore these tips and enhance your investment decisions, consider using the promo code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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