It has been about a month since the last earnings report for Wix.com (WIX - Free Report) . Shares have added about 12.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Wix.com due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Wix.com Tops Q4 Earnings & Revenues, Guides Weak
Wix.com delivered non-GAAP earnings of 42 cents per share in the fourth quarter of 2018, beating the Zacks Consensus Estimate of 30 cents. The bottom line was also higher than the year-ago quarter’s figure of 16 cent per share.
Total revenues surged 39% year over year to $164.2 million, surpassing the Zacks Consensus Estimate of $162 million. Collections during the reported quarter came in at $176 million, up 33% year over year, attributable to expansion of new products and enhancement of existing products.
The company witnessed better-than-expected conversion and retention in its user cohorts. The company added a total of 147,000 net premium subscriptions in the reported quarter, which came in at 4 million as of Dec 31, 2018 (up 24% year over year).
Wix.com added 5.9 million registered users during the quarter under review. Registered users as of Dec 31, 2018 came in at 142 million, up 19% year over year.
During the reported quarter, average revenue per subscription (ARPS) increased 22.6% year over year. The surge can primarily be attributed to favorable mix of higher priced subscription packages.
Recently, the company unveiled a suite of 20 products named Ascend by Wix, which enable businesses to connect with and manage their customer base. This in turn aids them in competing with larger businesses online.
The company also intends to launch Wix Turbo, a platform that enhances speeds across all Wix websites. 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 challenges and helping them to grow.
The company also inked a deal with MyHeritage, which will be utilizing the Wix Answers Knowledge Base, ticketing system, and call center tools. Wix.com is also partnering withschools and universities all over the United States to make Wix part of the curriculum.
We believe that these product innovations and partnership deals bode well for Wix.com.
Non-GAAP gross profit advanced 30.3% from the year-ago quarter to $131 million. Nonetheless, non-GAAP gross margin contracted 500 basis points (bps) to 80%.
The company’s non-GAAP operating income for the reported quarter came in at $18.8 million compared with $9.7 million reported in the year-ago quarter. As a percentage of revenues non-GAAP operating income came in at 11.5% compared with 8.2% recorded in the year-ago period.
As on Dec 31, 2018, Wix.com had cash and cash equivalents of $331.1 million, up from $319.9 million in the previous quarter.
Cash flow from operations came in at $36.1 million during the fourth quarter compared with $27.6 million reported in the previous quarter. Free cash flow was $32.7 million during the reported quarter.
Fiscal 2018 Highlights
WIX reported non-GAAP earnings of $1.07 per share in fiscal 2018. The figure reversed the year-ago quarter’s loss of 1 cent per share.
Total revenues increased 42% year over year to $603.7 million. Collections during the reported quarter came in at $658.4 million, up 36% year over year.
In fiscal 2018, ARPS increased 12% year over year. The surge can primarily be attributed to higher monetization.
For the first quarter, the company expects revenues in the range of $172-$173 million, representing year-over-year growth of 25-26%. Collections are projected to be in the range of $196-$197 million, representing year-over-year growth of 23%.
The company provided fiscal 2019 guidance. Management anticipates revenues in the range of $755-$761million. This reflects year-over-year growth of 25-26%.
Collections are projected to be in the range of $817-$827 million, displaying year-over-year growth of 24-26%.
The company expects free cash in the range of $135-$140 million, representing year-over-year growth of 33-38%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -35.19% due to these changes.
Currently, Wix.com has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Wix.com has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.