Israel’s Wix Championed by Bullish Analysts Amid LossesYaacov Benmeleh
Wix.com has clocked up 15 consecutive quarters of losses, seen its shares drop by 34 percent this year and says Israeli government regulations are challenging growth.
That’s done nothing to dissuade analysts from JPMorgan Securities Inc. to Oppenheimer & Co. from backing the web developer’s stock this month. All seven who cover Wix rate the shares a buy, overweight or outperform, with an average price target more than 65 percent above the current level, according to data compiled by Bloomberg. Wix.com is a platform where users create websites using drag-and-drop tools.
“What Wix is doing is bringing local businesses online, and this is going to be an important growth area for the next few years,” Jason Helfstein, a New York-based analyst at Oppenheimer who rates the shares outperform, said by phone on Nov. 10. “Seventy-five percent of businesses around the world don’t have websites.”
Wix’s stock almost doubled in less than four months after it raised $127 million on the Nasdaq last year, at the time the biggest initial public offering out of Israel since 2007. It has plummeted since then and investors are avoiding companies that have yet to report a profit, Helfstein said.
Wix reported a $12.8 million third-quarter loss last week, widening 66 percent from the same period a year ago. Shares have gained 1.2 percent in the past year, compared with a 13 percent advance for industry peers.
Israeli regulators add to the company’s burdens, according to Nir Zohar, Wix’s chief operating officer. As an Israel-based, U.S.-listed company it faces two sets of regulation, and in Israel it struggles to obtain visas for new hires coming from outside the country, he said.
“I have sets of regulation on compensation, board of directors, how to nominate people, how to manage aspects of the company,” Zohar said by phone on Nov. 6. “My flexibility to move within them becomes zero. Every simple thing becomes such a pain and instead of managing my company, which is what I’m supposed to be doing, I’m trying to mess around between the lines.”
Legislation aimed at lowering the cost of living and boosting government revenue has prompted share declines from cellular operators to gas-exploration companies in Israel. Mellanox Technologies Ltd. delisted from the Tel-Aviv Stock Exchange in 2013, citing burdensome regulation.
A spokesman for the Ministry of Economy had no immediate comment when contacted by e-mail yesterday.
Wix’s shares slipped 0.1 percent to $17.73 at 10:50 a.m. in New York, while the Bloomberg Israel-US Equity index was little changed. Israel’s TA-25 Index added less than 0.1 percent at the close in local trading.
The stock is still 7.5 percent above its listing price, though down from a record $31.32 in February. It will probably climb to $29 within 12 months, according to the average of analyst estimates compiled by Bloomberg.
Revenue in the third quarter increased 75 percent from the same period a year ago, while the loss was smaller than analysts forecast. Premium subscribers grew 10 percent from the second quarter to about 1.1 million users, and the company raised its outlook for 2014 revenue to between $139 million and $140 million from between $136 million and $138 million.
The company said it will reach profitability on an adjusted earnings before interest, taxes, depreciation and amortization basis during the second half of 2015, according to its third quarter financial statement, the first time it has given guidance.
“Once profitability is imminent, you will see the shares rise,” Helfstein said.
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