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Wix.com (WIX) Up 3% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Wix.com (WIX). Shares have added about 3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Wix.com due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Wix.com Q2 Earnings & Revenues Top Estimates, Ups ‘19 View

Wix.com Ltd. delivered second-quarter 2019 non-GAAP earnings of 34 cents per share beating the Zacks Consensus Estimate of 17 cents. Notably, the bottom line also improved 17.2% on a year-over-year basis.

Total revenues surged 27% year over year to $185.4 million, surpassing the Zacks Consensus Estimate of $184 million. The figure also came ahead of management’s guided range of $182 million to $184 million.

The year-over-year increase in the top line can primarily be attributed to robust product offering and higher sales of complementary products.  Further, growing user and subscription base were other positives.

Quarter in Detail

Collections during the reported quarter came in at $199.6 million, up 25% year over year, attributable to expansion of new products and enhancement of existing products. Management had projected collections in the range of $197-$199 million.

The company witnessed better-than-expected conversion and retention in its user cohorts. The company added a total of 132,000 net premium subscriptions in the reported quarter, which came in at 4.3 million as of Jun 30, 2019 (up 17% year over year).

Wix added 5.7 million registered users during the reported quarter. Registered users as of Jun 30, 2019 came in at 154 million, up 18% year over year.

During the reported quarter, average revenue per subscription (ARPS) increased 9% year over year. The surge can primarily be attributed to favorable mix of higher priced subscription packages.

In the quarter under review, collections from first-half 2019 user cohorts increased 9% year over year. The company anticipates collections from all existing cohorts to be roughly $5.9 billion in the future, up 28% year over year.

Notably, Average Collections per Subscription (ACPS) of the latest annual subscriptions in the US improved 29% on a year-over-year basis and came in at $228 in the second quarter.

Operating Results

Non-GAAP gross profit advanced 20% from the year-ago quarter to $140.3 million. Nonetheless, non-GAAP gross margin contracted 400 bps to 76%, primarily owing to lower TPAs gross margin and higher cost of revenues.

Non-GAAP operating expenses surged 21.4% to $126.1 million in the second quarter.

The company reported non-GAAP operating income of $14.2 million as compared with $12.9 million reported in the year-ago quarter. As percentage of revenues non-GAAP operating margin contracted 110 bps to 7.7%,

Balance Sheet & Cash Flow

As on Jun 30, 2019, Wix had cash and cash equivalents of $351.5 million, up from $348.1 million in the previous quarter.

Cash flow from operations came in at $37.2 million during the second quarter compared with $35.1 million reported in the previous quarter. Free cash flow was $30.8 million, compared with $307 million reported in the prior quarter.

Guidance

For the third quarter, the company expects revenues in the range of $196-$198 million, suggesting growth of 26-27% from the year-ago quarter. Collections are projected to be in the range of $204-$206 million, indicating an improvement of 25-27% from the year-ago reported figure

The company updated fiscal 2019 guidance. Management now anticipates revenues in the range of $761-$765 million, up from prior guided range of $758-$763 million. This indicates an improvement of 26% to 27% from the year-ago reported figure.

Collections are projected to be in the range of $825-$831 million, suggesting growth of 25-26% from the prior-year quarter, compared with previous predicted range of $822-$830 million.

Moreover, the company expects free cash in the range of $123-$126 million, indicating an improvement of 21-24% from the year-ago quarter. Notably, the previously guided range was $122-$126 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted -15.58% due to these changes.

VGM Scores

Currently, Wix.com has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Wix.com has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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