Despite the ongoing societal shift toward a digital transformation, not all tech or website building companies continue to perform. The latest victim, Wix.com Ltd. (WIX), recently posted unremarkable quarterly earnings results, resulting in a large drop-off in valuation. The website building platform was unsuccessful in accelerating its B2B bookings, and management expects overall volatility to persist.
These factors have shaken off investors, and despite the currently attractive valuation, Kenneth Wong of Guggenheim Partners believes it to be considered a “value trap,” as in, not actually valuable, moving forward. Gross margins were impacted by Creative and Business Solutions segment underperformance, although management is confident these segments will rebound later this year.
Wong rated the stock a Hold and removed his price target. He cited the possible future volatility in Wix’s business results as a reason for not making a forecast.
Not all was doom and gloom for the software firm, which saw free cash flow come in above Wall Street consensus estimates and payments in-line with expectations.
The four-starred analyst noted that there is “eroding investor goodwill following a series of execution missteps throughout FY21.” He expressed humility in his own past projections, writing that he “misjudged the transient nature of Wix’s soft financial results over the past three quarters.”
Looking ahead, even the easy comparisons for upcoming earnings releases may not be enough to satiate investors. Wong expects Wix’s revenues to continue decelerating and finds it difficult to call a bottom in the share price.
On TipRanks, WIX has a Moderate Buy analyst consensus rating based on 8 Buy and 4 Hold ratings. The average Wix.com price target is $142.73, suggesting possible 12-month upside potential of 53.16%.
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