Wix Grabs Investors' Attention After Setting Subscriber Recordby
Company added 140,000 new paying customers in last quarter
Stock fell after it didn't beat estimates in second quarter
After months of getting the brush off from investors, it seems Wix.com Ltd. is finally getting some love.
The Tel Aviv-based company, which provides free online tools to build websites, has rallied 16 percent in the past month, rebounding from an 11-month low in September. It rose 4.8 percent last week after reporting a record 140,000 new paying subscribers in the third quarter.
Wix, which has yet to turn a profit since going public two years ago, hired former quarterback Brett Favre and rapper Macklemore to attract more users to its web tools. Even with JPMorgan Chase & Co. defending the splurge as a motor for growth, jittery investors dumped the stock after second-quarter results. This time, they seem to be warming up to the Israeli company.
It “continues to put up solid results, strong growth, a little more profitability than what they’re guiding for,” said Kerry Rice, an analyst at Needham & Co. in San Francisco. “It’s executing as people would want it to.”
Wix’s revenue rose 43 percent to $53.6 million in the third quarter, compared with $37.5 million a year ago. Its net loss narrowed to $11.7 million, from $12.8 million in the same period in 2014. Revenue is forecast to grow 43 percent to $203 million in 2015, after climbing 76 percent last year to $142 million.
The company now has more than 1.6 million paying subscribers. It released a new interface for the service to make the tools easier to use and has hip-hop artist Macklemore on the payroll to tout the software to fellow musicians. It also targets hotel owners and e-commerce entrepreneurs.
“I’m hoping that people are appreciating the fact that we managed to achieve and execute on exactly the things we consider important,” Wix President Nir Zohar said by phone from Tel Aviv Nov. 4. “We stuck to the plan.”
Wix, with a market value of $891 million, has rallied 40 percent since going public on Nov. 5, 2013, beating an 19 percent gain in the S&P 500 Index and an 8.7 percent rise among its peers on the Russell 2000 Index of mid-cap stocks.
All 11 analysts covering Wix recommend buying the shares, data compiled by Bloomberg show. The stock will return 31 percent in the next 12 months, according to the average of analyst estimates.
The slower pace of global growth is making investors, still waiting on the Federal Reserve to raise interest rates, wary of mid-cap stocks such as Wix, said Mark Hawtin, director of investments at GAM U.K. in London, which oversees about $120 billion in assets, including Wix shares.
“You can make a lot of money shorting these mid-cap names because they miss slightly, or in the case of Wix, they do a touch better, but it still just isn’t good enough,” Hawtin said. “I don’t think the market gives them fair due.”
He’s still holding on to Wix shares, confident that appetite for mid-cap stocks will return.