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The Resilient Rise of WIX: A 38% Surge in Stocks Amidst Gathering Clouds

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Wix.com has been riding high in the financial markets, basking in the glow of escalating success across its diverse business units and a stream of innovative offerings.

Based out of the bustling city of Tel Aviv, Israel, and established in 2006, WIX stands tall as a cloud-based web development platform that equips businesses, professionals, and individuals with the tools needed to create tailored websites and application platforms to bolster their online presence.

The company’s fortunes have been on the upswing on the trading front, with its stock witnessing a robust surge of 37.8%, trumping the 24.9% growth of the S&P Composite.

Supported by a stable financial framework and promising growth avenues, this Zacks Rank #2 (Buy) stock emerges as a compelling investment prospect at the present juncture.

Zacks Investment Research
Image Source: Zacks Investment Research

Another feather in its cap is the VGM Score of B that WIX boasts, a testimony to its investment-worthy status as per Zacks’ distinct evaluation methodology, which identifies stocks with either a Zacks Rank #1 (Strong Buy) or 2 coupled with a VGM Score of A or B as solid investment prospects.

WIX has been surpassing expectations consistently over the past four quarters, registering an average earnings surprise of an impressive 124.1%.

Steering Towards a Prosperous Future

Fueling this growth trajectory are the Creative Subscriptions and Business Solutions segments, which have been the key drivers of the top-line as of late. The periodic introduction of new products, an uptick in registered users, and increased uptake of premium subscriptions are pivotal to this progress.

In the last reported quarter, the revenues from Creative Subscriptions (constituting 73.3% of total revenues) witnessed a 12% surge year over year, settling at $296.2 million. Similarly, revenues from Business Solutions (accounting for 26.7% of total revenues) saw a 20% upswing, reaching $107.6 million.

Capitalizing on the burgeoning demand for Artificial Intelligence (AI), WIX is poised to tap into this trend by rolling out cutting-edge products like AI Site Generator, AI Chat Experience for businesses, and AI Code Assistant.

The promising adoption of Wix Studio is anticipated to bolster the monetization of partner cohorts significantly. Moreover, the shift towards higher-tier packages, revised pricing strategies, and the burgeoning adoption of business solutions products have been instrumental in driving the average revenue per subscription.

Forecasting Future Fortunes

Forecasting ahead, WIX is optimistic about reaping the benefits of a steady macroeconomic landscape and firm business traction, with projected revenues for 2024 poised to grow by 11-13% and hover within the range of $1.73-$1.76 billion.

The management is eyeing a free cash flow (excluding HQ capital expenditure) in the window of $370-$400 million, which represents a healthy slice of 21-23% of revenues.

As for the first quarter of 2024, revenues are anticipated to fall between $415 million and $419 million, indicating an 11-12% uplift from the figures reported in the previous year. The Zacks Consensus Estimate backs this projection, placing revenues close to $417.7 million and reflecting a 11.7% upsurge from the comparisons with the previous year.

Dampening Factors in the Horizon

Nonetheless, adverse fluctuations in foreign exchange rates and the burgeoning accumulated deficit present headwinds that warrant careful navigation.

The spiraling investments in product development, infrastructure enhancements, and market competition continue to loom as challenges on the company’s horizon.

Exploring Alternatives in the Tech Universe

For investors keen on diversifying their portfolio within the tech realm, several notable stocks merit attention. Synopsys (SNPS), Iridium Communications (IRDM), and Microsoft (MSFT) stand tall as top-ranked contenders. While SNPS and IRDM boast a Zacks Rank #1 each, MSFT shines with a Zacks Rank of 2 currently.

The Zacks Consensus Estimate for SNPS’ fiscal 2024 EPS stands at $13.36, underpinning a long-term earnings growth rate of 17.5%. SNPS has outperformed the Zacks Consensus Estimate over the past four quarters, with an average positive surprise of 4.1%. SNPS’ shares have ascended by a formidable 46.5% in the bygone year.

On the other hand, IRDM has witnessed a substantial surge in the Zacks Consensus Estimate for its 2024 EPS, which has spiked by 148.3% in the preceding 60 days to 72 cents. Although Iridium has recorded earnings beats in two of the last four quarters with two misses as well, the mean earnings surprise stands at an impressive 91.7%.

Microsoft, a tech stalwart, has the Zacks Consensus Estimate for its fiscal 2024 EPS at $11.63, signaling an 18.6% growth from last year’s levels. The tech giant has displayed a consistent record of outperforming the Zacks Consensus Estimate in each of the last four quarters, boasting an average surprise of 8.8%. The long-term earnings growth rate for MSFT sits at 16.2%, with shares witnessing a formidable 46.7% surge in the trailing year.

Zacks Names #1 Semiconductor Stock

With a robust earnings trajectory and an expanding clientele, this semiconductor stock is primed to cater to the surging appetite for Artificial Intelligence, Machine Learning, and the Internet of Things. The global semiconductor manufacturing industry is slated to soar from $452 billion in 2021 to a monumental $803 billion by 2028.

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Microsoft Corporation (MSFT) : Free Stock Analysis Report

Synopsys, Inc. (SNPS) : Free Stock Analysis Report

Iridium Communications Inc (IRDM) : Free Stock Analysis Report

Wix.com Ltd. (WIX) : Free Stock Analysis Report

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The viewpoints articulated in this piece reflect the author’s own sentiments and do not necessarily mirror those of Nasdaq, Inc.

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