Wix: The Market Is Overreacting To Margin Pressure
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The following is a 250-word excerpt from my full article on Seeking Alpha: A crowdsourced financial market content service where investors can share ideas, discuss news, and make informed investment decisions. Below is a link to the full article:
https://seekingalpha.com/article/4861082-wix-stock-market-is-overreacting-to-margin-pressure
Summary
Wix is executing well, with steady Creative Subscriptions revenue and faster growth in Business Solutions driven by payments, transactions, and partner-led customers.
Q3 revenue and bookings both grew 14% year over year, landing at the high end of management guidance and reflecting improving monetization and user activity.
Near-term margin pressure is tied to front-end AI costs from Base44, not weakening fundamentals, and is supported by strong operating income and cash flow.
Wix generated $478 million in annual free cash flow and expects $600 million in 2025, reinforcing earnings quality and balance sheet flexibility.
Shares trade roughly 36% below intrinsic value, suggesting the market is underestimating Wix’s long-term earnings power and cash flow durability.
Investment Thesis
I assign Wix.com Ltd. (WIX) a buy rating due to their solid execution, especially given their steady revenue in their Creative Subscriptions revenue segment and accelerating revenue in their Business Solutions segment. The company also has improving revenue quality due to its growing payments and transaction activity, and, while margins are currently undergoing near-term pressure due to aggressive investment in Base44, management has noted that this is due to front-end heavy costs and is supported by the company's stellar free cash flow that allows it to fund this investment without suffering financial strain or balance sheet deterioration. The company is also trading at 36% below its intrinsic value of $125.92, confirming the market's underappreciation of Wix's earnings power for the long term and further solidifying my buy rating for the company…
