Why Wix.com Stock Looks Sick This Morning

What happened

Website builder actions Wix.com (NASDAQ: WIX) collapse – down 14.5% as of 10:15 a.m. EDT – despite the company reporting battered earnings and earnings late last night.

Prior to the second quarter, Wall Street had forecast that Wix would lose $ 0.37 per share (pro forma) on $ 311.7 million in revenue. In fact, the company lost just $ 0.28 per share, and its revenue was $ 316.4 million – clear gains on both counts.

Image source: Getty Images.

So what

Additionally, the loss Wall Street predicted for Wix – and the smaller loss reported by Wix – were both pro forma numbers. The company’s actual net income, calculated using generally accepted accounting principles (GAAP), was even more impressive, however, at $ 0.66 per share.

Sales for the quarter were up 34% year-over-year, with Wix observing that “more and more businesses continue to use Wix to create, manage and grow their online presence, with a growing number relying on us as a complete operating system ”. Why, Wix even reported positive free cash flow for the quarter of $ 14.7 million!

Now what

And yet the stock is down today. Why is that?

Evaluation is definitely a concern. Even with $ 73 million in free cash flow, Wix trades over 200 times its cash earnings from last year.

The focus – and what it portends for Wix’s growth rate – is another concern. Wix predicted third-quarter sales to range from $ 311 million to $ 317 million, implying 25% year-over-year growth. Wall Street, however, expected Wix to make more than $ 325 million in third-quarter sales, so the company’s forecast equates to a promise to “run out” in the third quarter. Likewise, management says full-year sales will not exceed $ 1.27 billion, below the $ 1.29 billion analysts want.

In short, Wix is ​​growing fast, but not as fast as investors had hoped.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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About Aldrich Stanley

Aldrich Stanley

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