Wix.com gains on RBC Capital upgrade

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By Michael Elkins

Shares of Wix.com Ltd. (NASDAQ:WIX) are up 1.09% on Thursday after RBC Capital upgraded the software company to an Outperform rating (from Sector Perform) and raised the price target to $100.00 (from $80.00).

Analysts wrote in a note, “With WIX down 51% in '22, we throw our hat back in the ring, upgrading to Outperform with a $100 PT on slightly raised estimates, more appropriately reflecting price increases. We see WIX as a solid defensive play benefiting from structurally higher new business formation (NBF) vs. pre-COVID, in the midst of exerting its pricing power for its very sticky subscription business and on a path towards significant and underappreciated FCF growth over the next several years. Slower sub adds and bigger GMV slowdown are biggest downside risks.”

RBC Capital estimates that WIX has around 30% and 80% of its price increases yet to flow through in '23 on subscription collections and revenue, respectively. These metrics significantly limit any risk to estimates in the near to mid-term. RBC believes WIX has pricing power where it can likely sustainably raise price every three to four years going forward.

Also, with new business formations happening at a higher rate than pre-COVID, digital solutions are in high demand. WIX’s business model nicely attaches to the creator economy theme along with a potential counter cyclical play on outsized tech job losses.