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An Oppenheimer analyst downgraded shares of Wix.com (NASDAQ:WIX) to Perform from Outperform on recession risks.
The logo maker is facing “stiff demand headwinds caused by macro, eCommerce pull-forward, and B2B volatility,” the analyst said in a client note.
The analyst is more positive on the software company after it signaled a focus pivot toward margins, although he recognizes investor skepticism.
“We were surprised management maintained its LT FCF target of 30% despite potential margin headwinds from Payments. However, our conversations suggest investors remain skeptical, with narratives such as “too little, too late” and “fool me once…” common talking points of bears,” the analyst wrote.
The analyst also took note of “meaningfully” improving website traffic for Wix.com although the declining overall trends are likely to keep “tentative inventors on the sidelines.”
Finally, the analyst also discussed Wix.com’s valuation with shares down roughly 65% year-to-end (YTD).
“WIX’s current valuation of 2.2x CY23E revenue (3.0x subscription) is extremely compelling. However, Wix.com also carries the largest perceived execution “debt” among peers, which will require longer duration of consistency to rebuild investor goodwill. However, we believe WIX could rebound more than other names as SaaS demand stabilizes and as eCommerce activity rebounds,” the analyst concluded.
Wix.com stock price is up about 1% in premarket Wednesday.
