Wix.com's User Cohort Data Shows Encouraging Growth, Analyst Expects Higher Free Cash Flow Margin in Second Half

Needham analyst Bernie McTernan reiterated Wix.com Ltd WIX with a Buy and a $120 price target.

WIX reported Q2 revenue 2% ahead of consensus estimates, primarily driven by better Business Solutions revenue and, to a lesser extent, Creative Subscriptions. 

From a different angle, Partner revenue drove most of the beat, but Self-Creator also outperformed our expectations, with both showing an acceleration in the YoY growth rates.

WIX increased the FY23 revenue guide by 1%, implying the second half of FY23 YoY growth accelerated by 100bps over the first half of FY23. 

User cohort data was encouraging, with the cumulative bookings for the 1Q23 cohort ~6% higher than the 1Q22 in the first two quarters despite 13% few users.

WIX reported their first quarter of GAAP operating income profits in their history, calling for sustained GAAP profitability in the near term. 

WIX raised their non-GAAP gross margin guidance by 100bps for FY23E and lowered the non-GAAP operating expense guide by 200bps, primarily driven by a 150bps lower outlook for sales and marketing.

FCF was below McTernan's expectations in the quarter, but WIX raised their guidance for the year by 17% and 12%, excluding the HQ building. WIX anticipated a higher FCF margin in the second half vs the first half.

The analyst flagged that WIX emphasized FCF per share more in the shareholder letter and indicated plans to address their strategies for growing FCF per share through FY25E at their investor day next week.

Price Action: WIX shares are up 10.20% at $97.54 on the last check Thursday.

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