WIX Stock Soars 33% Year to Date: Will the Rally Continue?

Core Insights - Wix.com (WIX) shares have increased by 32.5% year to date, outperforming the S&P 500 composite and sub-industry growth of 16.2% and 1.8% respectively [1] - The stock has gained 4.2% since the announcement of strong second-quarter 2024 results on August 7, but is still trading 8.7% below its 52-week high of $178.65, making it relatively affordable for investors [1] Company Overview - Wix, headquartered in Tel Aviv, Israel, is a cloud-based web development platform founded in 2006, providing solutions for businesses and individuals to create customized websites and applications [2] - The company has consistently surpassed the Zacks Consensus Estimate in the last four quarters, with an average earnings surprise of 29.8% [2] Growth Drivers - The increasing adoption of AI products and Wix Studio is driving the company's performance, with management noting better-than-expected growth in Studio accounts and new partners [4] - The introduction of 17 AI business assistants and advanced AI capabilities for mobile app builders is enhancing user experience and expanding the product portfolio [5][6] - The AI Website Builder has been expanded to support multiple languages, aiding global users in website creation [7] Financial Performance - In Q2 2024, Wix's total revenues rose by 12% year over year to $435.7 million, exceeding the Zacks Consensus Estimate of $433.6 million [8] - Bookings increased by 15% year over year to $458.4 million, with Creative Subscriptions' bookings up 12% to $329 million and Business Solutions' bookings rising 24% to $129.4 million [8] - Partner revenues reached $148.4 million, accounting for 34% of total revenues, marking a 29% year-over-year increase [9] Outlook - Wix has revised its outlook for 2024, expecting total bookings between $1,802 million and $1,822 million, and total revenues in the range of $1,747 million to $1,761 million [10] - Free cash flow is projected to be between $460 million and $470 million, representing 26-27% of revenues [11] Earnings Estimates - The Zacks Consensus Estimate for 2024 and 2025 earnings per share (EPS) has increased by 7.3% and 2.4% respectively, with estimated EPS of $5.86 for 2024 and $6.93 for 2025, indicating growth of 33.5% and 18.3% from the previous year [12] - Revenue estimates for 2024 and 2025 are projected at $1.75 billion and $1.99 billion, reflecting growth of 12.4% and 13.2% year-over-year [13] Challenges - The company faces headwinds from unfavorable foreign currency movements and weak global macroeconomic conditions, along with increased investments in product development and competition in the e-commerce marketplace [14]