Wix.com’s WIX shares have risen 29.5% in a month, driven by the strong financial performance and solid business outlook. It also has outpaced the S&P 500 composite and the sub-industry’s growth of 1.6% and 4.7%, respectively.

One-Month Price Performance

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WIX stock has gained 26% since reporting better-than-expected third-quarter 2024 results on Nov. 20. The stock is trading above its 100 and 200-day moving averages, indicating robust upward momentum and price stability.

Headquartered in Tel Aviv, Israel and founded in 2006, Wix is a cloud-based web development platform. The company's platform offers solutions that enable businesses, organizations, professionals and individuals to develop customized websites and application platforms and grow their online presence.

Closing at $221.22 as of yesterday’s trading session, WIX stock is currently trading 3.7% below its 52-week high of $229.79, attained on Dec. 4, 2024. Does this pullback offer investors a buying opportunity? Let us dive into WIX’s prospects and determine the best course of action for your portfolio.

WIX’s Focus on AI-Powered Solutions to Drive Growth

Wix continues to focus on strategic investments in AI offerings, Studio and commerce solutions. WIX Studio, the company’s premium offering for agencies and professionals, accounted for 75% of new partner bookings in the third quarter of 2024, a notable increase from the previous quarter. The platform’s compelling features and efficiency have made it the foremost choice for larger projects. 

WIX has been focusing on generative AI as it represents a significant business growth driver. The company has been also embedding AI assistants across its platform and has released 29 AI business assistants so far. It continues to add new products to gain on the AI boom. New AI business assistants have been improving operational efficiency and customer conversion rates. 

Wix's commerce platform continues to show impressive results with Gross Payment Volume (GPV) growth increasing 14% year over year in the third quarter. The company also witnessed a 23% year-over-year growth in transaction revenues, totaling $54 million. More than 50% of GPV in the third quarter came from the Partner business, further demonstrating the integrated strength of Wix’s commerce solutions.

The continued evolution of AI and Studio offerings is expected to drive revenue growth. AI-powered solutions will not only enhance user experience but also create opportunities for direct monetization, providing a significant tailwind for 2025 and beyond.

WIX’s Robust Outlook

Strong third-quarter performance led to a revised full-year revenue outlook of $1,757-$1,764 million, indicating 13% year-over-year growth from the earlier guidance of $1,747-$1,761 million. Bookings revised to $1,822-$1,832 million (14-15% year-over-year growth), up from prior guidance of $1,802-$1,822 million. Bookings growth is anticipated to accelerate to 17% year over year in the second half with growth exiting 2024 at 18%. 

As bookings and revenues grow, Wix aims to maintain a stable cost base, paving the way for meaningful free cash flow margin expansion. Free Cash Flow (excluding HQ capital expenditure) is expected in the range of $483-$488 million (27-28% of revenues), indicating an increase from earlier guidance of $460-$470 million.

Estimates Northbound for WIX

In the past 60 days, analysts have increased their earnings estimates for the current and the next quarter by 5.9% and 4.5%, respectively. The same for the current and the next year is revised upward by 4.1% and 6%, respectively.

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WIX’s Attractive Valuation

WIX presents a compelling investment opportunity with its attractive forward 12-month price-to-sales ratio of 6.09, significantly lower than the industry average of 11.5, observed in the past year. Its forward 12-month price-to-sales ratio positions WIX as a value-driven choice with significant upside potential.

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WIX Faces Certain Headwinds

Increasing investments in product development, infrastructure and platform is a headwind. Stiff competition in the cloud and AI space amid a volatile macro backdrop is an additional headwind.

Wix is focused on expanding its reach through marketing and support for the company’s partners, such as professional web designers. This effort has raised operating expenses. In the third quarter, total operating expenses rose 2.3% year over year to $276.8 million, driven by an uptick in selling and marketing, and general and administrative costs. Non-GAAP operating costs went up slightly compared with the previous quarter, mainly because of planned increases in sales and marketing. Most of the extra spending was for branding efforts related to Studio, with some going toward customer acquisition as demand showed gradual improvement during the quarter. 

Continued pressure from increased costs could limit the company’s ability to expand margins, especially if revenue growth does not keep up.

How to Play WIX Stock?

With higher bookings, a solid commerce platform, an expanding AI product and increasing Studio adoption, Wix is well-positioned to capitalize on long-term opportunities. However, increasing costs and various external factors could put downward pressure on the stock. 

It might not be a judicious investment decision to bet on Wix at the moment but long-term investors already owning the stock can stay put.

WIX carries a Zacks Rank #3 (Hold) at present.

Stocks to Consider

Some better-ranked stocks from the broader technology space are Plexus Corp., Inc. PLXS, InterDigital, Inc. IDCC and Workday Inc. WDAY. PLXS & IDCC presently sport a Zacks Rank #1 (Strong Buy), whereas WDAY carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for PLXS’ fiscal 2025 EPS is pegged at $6.79, unchanged in the past seven days. PLXS’ earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, while missing once, with the average surprise being 10.3%. Its shares have increased 63.7% in the past year.

The Zacks Consensus Estimate for IDCC’s 2024 earnings is pegged at $15.22, up 12.5% in the past 30 days. IDCC’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 163.7%. Its shares have surged 82.6% in the past year.

The Zacks Consensus Estimate for WDAY’s fiscal 2025 EPS is pegged at $7.11, up 2% in the past 30 days. WDAY’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 9.3%. The stock has lost 3.6% in the past year.

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