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Piper Sandler analyst Clarke Jeffries upgraded Wix.com (NASDAQ:WIX) from Neutral to Overweight and raised the price target from $184 to $200.
As the growthiest asset in the Web Builder space historically, Wix has undergone one of the most significant transformations over the past two years, expanding free cash flow margins by 28pts in two years while growth has remained stable, Jeffries noted.
When the analyst downgraded earlier this year, near-term upside seemed contingent on growth outcomes above and beyond what he was willing to model.
Also Read: Wix’s Q2 Earnings: Revenue And Profit Beat, Strong Performance in Partner And Subscription Segments
The heart of that concern has stayed the same; Jeffries is still skeptical about some of the acceleration forecasted for the second half. However, from a valuation perspective, Wix stock today trades at parity to GoDaddy Inc (NYSE:GDDY) on calendar 2025 free cash flow, despite being a double-digit grower and presenting margin expansion potential beyond 2025, to the long-term free cash flow margin target of 35%.
Jeffries flagged that 2024 has been a tremendous year for Web Builders. The three public vendors in this space have outperformed the market year-to-date.
Profitability and returning capital have been the pillars of outperformance. However, with likely most stock tendered to the revised Squarespace, Inc (NYSE:SQSP) deal and such year-to-date solid performance, the analyst noted it’s an appropriate time to revisit his thesis on GoDaddy and Wix.
The analyst noted that both names are sitting today at ~$160, ~17 times calendar 2025 free cash flow, and demonstrating accelerating Bookings growth year-to-date. Looking to 2025, he noted the differentiator for stock performance will be the potential for improving growth and the horizon for continued margin improvements. Thus, he noted a more compelling ownership thesis for Wix at current levels.
Jeffries projected third-quarter revenue of $444.4 million and EPS of $1.70.
Since 2021, customer growth has been challenged in the Web Builders space, growing below trend as the industry digested much of the pull forward from COVID and stimulus years and a challenging economic backdrop in recent quarters, the analyst noted. However, he said that growth has not fallen as precipitously as customer growth due to pricing, which has ramped up in response to lower subscriber growth.
Looking ahead to 2025, Jeffries noted investors will be evaluating how much growth could come back to these models under normalized economic conditions. Under that scenario, the analyst noted Wix is the clear favorite, seen as the higher medium-term and terminal grower.
Price Action: WIX stock is up 2.45% at $164.58 at the last check Monday.
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