On Tuesday, Citi reaffirmed its confidence in Wix.com (NASDAQ:WIX) shares, maintaining a Buy rating and a $202.00 price target for the company's stock. The endorsement follows a series of agency channel checks and market share analysis, which suggest Wix Studio is expanding its presence and adoption among web design agencies.
The research conducted by Citi indicates that Wix Studio, a platform designed for professional web creation, is increasingly being utilized by agencies, signaling a growing market share.
Despite receiving numerous inquiries from investors regarding the adoption of Wix Studio and Wix's potential within the overall web and design agency market, Citi aims to clarify these points, emphasizing the nascent stage of Wix's penetration into the professional segment of the web building market, which currently stands at approximately 1-2%.
Citi's analysis shows that Wix Studio is gaining traction, with agencies responding positively to product improvements. This trend supports the expectation of a lengthier growth period for Wix's Partners business. According to Citi, the increase in the number of partners and average revenue per user (ARPU) could lead to segment estimates being conservative, potentially presenting an upside.
The firm's confidence is further bolstered by Wix's valuation, which Citi finds appealing at 14 times the estimated value to forecasted free cash flow for the year 2026. The positive outlook from Citi suggests that Wix.com is well-positioned to continue its growth trajectory in the competitive web development market.
In other recent news, Wix.com has displayed substantial growth in its earnings and revenue, with Q2 bookings experiencing a year-over-year increase of 15%, amounting to $458 million. The revenue also demonstrated a 12% year-over-year growth, concluding above guidance at $436 million.
Analysts from Benchmark, Cantor Fitzgerald, and Needham have responded to these developments with upgrades, raising their price targets to $225, $200, and $200 respectively, all maintaining a Buy rating. However, Piper Sandler downgraded Wix.com to Neutral due to valuation concerns, and KeyBanc maintained a Sector Weight rating.
Wix.com has also completed a $225 million share buyback program, indicating its confidence in long-term growth prospects. In addition to this, the company introduced an AI theme assistant to streamline website design, providing users with personalized guidance and real-time suggestions.
The company's growth is expected to be driven by factors such as an increase in merchant additions through Wix's Studio-led Partner program, up-selling to existing customers, and an anticipated increase in Studio bookings. Benchmark's analysis suggests a potential acceleration in top-line growth for Wix.com over the next twelve months. These recent developments highlight Wix.com's commitment to innovation and growth.
InvestingPro Insights
Wix.com's recent performance and financial metrics align with Citi's bullish outlook. According to InvestingPro data, Wix has shown impressive revenue growth of 12.85% over the last twelve months, reaching $1.65 billion. This growth trajectory supports Citi's view on the company's expanding market share and adoption of Wix Studio.
InvestingPro Tips highlight that Wix's net income is expected to grow this year, and the company has been profitable over the last twelve months. These factors reinforce the positive sentiment expressed in Citi's analysis. Additionally, Wix operates with a moderate level of debt, which could provide financial flexibility as it continues to expand its presence in the professional web development market.
The company's stock has shown a strong performance, with a 95.93% price total return over the past year. This aligns with Citi's maintained Buy rating and suggests investor confidence in Wix's growth strategy.
For readers interested in a deeper dive into Wix's financial health and market position, InvestingPro offers 12 additional tips, providing a comprehensive view of the company's prospects.
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