Wix falls hard but analysts optimistic


Analyst JPMorgan gave Wix "outperform," though the share fell despite the website builder reporting its first-ever EBITDA profit.

Website building company Wix.com Ltd. (Nasdaq: WIX) was very satisfied with the company's second quarter results, which included its first profit based on adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). The investors were less enthusiastic, sending the company share price tumbling by 16.5% to $22.90 on a high trading volume, reflecting an $884 million market cap.

Wix held its Nasdaq IPO in late 2013 at $16.50 a share, and its share price leaped to a $31 peak shortly afterwards. The recent trend in the share has been positive, with the price nearing the peak, but this trend came to a halt yesterday.

Founded by CEO Avishai Abrahami, Wix developed a platform for setting up websites designed primarily for small businesses. The company has been profitable in EBITDA, but its bottom line is still negative, with a $12.3 million GAAP net loss and an $8.2 million non-GAAP net loss.

Analysts covering the company yesterday published positive responses to its reports. JPMorgan said that seasonally, the second quarter was usually weak, but Wix had maintained its momentum from the first quarter generated by its Super Bowl advertisement, and the company had increased the number of its paying subscribers by 132,000.

According to JPMorgan analyst Sterling Auty, the drop in the share price can be attributed to the fact that the annual revenue forecast it provided yesterday was the same as the market forecast.

"We believe that this interpretation is mistaken, because we see the business momentum as very strong through the figures for the number of users and EBITDA," Auty wrote. He recommended "Market outperform," with a target price of $42 (for December 2016), 84% above the current market price.

Oppenheimer raised its target price from $27 to $30 (31% above the market price). Analyst Jason Helfstein believes that the company is turning from website builder into a provider of cloud computing solutions for small and medium-sized businesses, which should be reflected in higher multiples. He adds that Wix is attractive in comparison with similar companies, and his recommendation is "Market outperform."

Published by Globes [online], Israel business news - www.globes-online.com - on August 5, 2015

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