Wix.com's New Business, Pricing Power Likely To Contribute To FCF, Analyst Says

RBC Capital analyst Brad Erickson upgraded Wix.com Ltd WIX from Sector Perform to Outperform and raised the price target from $80 to $100.
The re-rating reflected lightly raised estimates, more appropriately reflecting price increases.
The analyst saw WIX as a solid defensive play benefiting from the structurally higher new business formation (NBF) against pre-COVID while exerting its pricing power for its sticky subscription business.
Erickson estimate WIX has ~30% and ~80% of its price increases yet to flow through in '23 on subscription collections & revenue, respectively, significantly limiting downside risk to estimates.
The company has pricing power where it can likely sustainably raise prices every 3-4 years going forward.
The analyst believes structurally higher NBF vs. pre-COVID is primarily here to stay.
Digital solutions for enabling business formation have never been more abundant where WIX nicely attaches to the creator economy theme along with a potential countercyclical play on outsized tech job losses.
The analyst liked WIX's differentiated focus on product development, particularly for Ecom solutions, where the opportunity to grow and gain share in agency channels and from WordPress remains significant.
The analyst noted that Wix is on the path toward significant & underappreciated FCF growth over the next several years.
Price Action: WIX shares traded higher by 2.64% at $80.17 on the last check Thursday.

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