At times, it is prudent to retain certain stocks that have enough potential but are weighed down by tough market conditions. Wix.com Ltd. (WIX - Free Report) seems to be one such stock, which investors need to retain if they are looking to reap long-term gains. Though the stock faces several headwinds at the moment, these are transitory in nature. There is enough scope for this Zacks Rank #3 (Hold) company to rebound in the long run.
Wix.com’s stock has surged 54.1% in the year-to-date period, substantially outperforming the the industry’s rally of 13.1%.
What’s Working in Favor of in Wix.com?
Wix.com delivered non-GAAP earnings of 39 cents per share in the third quarter of 2018, beating the Zacks Consensus Estimate of 25 cents. The figure was also higher than the year-ago quarter’s earnings of 1 cent per share.
Total revenues increased 40.1% year over year to $155.6 million, surpassing the Zacks Consensus Estimate of $153 million. Collections during the last reported quarter came in at $162.8 million, up 36% year over year, attributable to expansion of new products and enhancement of existing products.
The company added a total of 177,000 net premium subscriptions in the quarter, which came in at 3.8 million as of Sep 30, 2018 (up 26% year over year).
The company released new features, consequently enhancing its Wix Code capabilities. Recently, the company unveiled Wix Video Maker. The latest product has improved functionality by enabling small businesses in facing challenges in creating engaging video content for advertisements. This in turn aids these small businesses in competing with larger businesses online.
The company also unveiled Wix Payments. The latest product is a complete payments platform designed to aid small businesses manage their financial flow addressing significant business challenge and helping them to grow. We believe that these product innovations bode well for Wix.com.
Further, the company provided encouraging fourth-quarter guidance and raised fiscal 2018 outlook. For the fourth quarter, the company expects revenues in the range of $161-$162 million, representing year-over-year growth of 36-37%. The Zacks Consensus Estimate for revenues is pegged at $162 million.
The company updated fiscal 2018 guidance. Management now anticipates fiscal 2018 revenues in the range of $601-$602 million (up from the previous guidance of $594-$599 million). This reflects year-over-year growth of 41%. The Zacks Consensus Estimate for revenues is pegged at $601.3 million.
The company continues to launch a number of user-friendly applications to meet the requirements of a dynamic retail environment, in turn adding to its user base.
Moreover, it is benefiting from retail’s rapid transition to mobile and social sales channels. We believe that massive growth in e-commerce spending also bodes well for Wix.com. Further, the company’s sound liquidity and cash flow reflects that it is making investments in the right direction.
Moreover, the company surpassed earnings estimates in three of the trailing four quarters, recording average beat of 57.3%.
However, increasing investments on product development, infrastructure and platform continues to drag down its bottom-line in the near term. Further, competition from peers is a major headwind.
Stocks to Consider
Some better-ranked stocks in the broader technology sector are Upland Software (UPLD - Free Report) , Marvell Technology Group Ltd. (MRVL - Free Report) and Twitter, Inc. (TWTR - Free Report) , all flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for Upland Software, Marvell and Twitter is currently pegged at 20%, 9.4% and 22.1%, respectively.
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