Needham's Developer Checks For Wix.com Highlight Continued Funnel Weakness

Needham analyst Bernie McTernan reiterated a Buy rating and $85 price target on Wix.com Ltd WIX following a round of web developer checks.
He spoke with 22 developers in the WIX Marketplace to shed light on the broader funnel. They did not indicate any improvement.
Failure of the funnel to return puts his 2H'22E and '23E estimates at risk.
In a note titled "Developer Checks Point to Continued Funnel Weakness," he provided a scenario analysis contemplating the funnel lower for longer and negatively impacting his adjusted EBITDA estimates by -9% and -18% in '22E and '23E, respectively.
That said, the stock looks cheap to him on his '23E estimate, even in his bear case scenario.
He thinks the subscription nature of the business would support relative outperformance in a worsening economy.
Utilizing its freemium-based business model, Wix's broad funnel approach to user acquisition is attractive through both a value creation and marketing efficiency lens, in his view.
He believes penetration of SMB websites is low and sees growth potential from companies being brought online and companies switching from existing domains to a more vertical-specific design-build.
Moreover, consistent cohort behavior and further evidence of monetization abilities through a relatively inelastic consumer base raise his conviction in the sustainability of the long-term growth trajectory of the business in an already large, fragmented market.
Price Action: WIX shares traded lower by 0.43% at $65.52 on the last check Wednesday.

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