Wix.Com's FCF Trajectory To Reach $500M By FY25 Amid Revenue Growth: Analyst

Benchmark analyst Mark Zgutowicz reiterated a Buy rating on Wix.Com Ltd. WIX, raising the price target to $130 from $120.

The most significant takeaway from Wix's analyst day was an increase in its '25 FCF margin target to 25% (from 20%), the analyst notes.

Based on it, the analyst raised his target price, expecting the company to realize its heightened FCF trajectory, supporting material EV/FCF multiple expansion.

Zgutowicz also highlights the company's prediction on revenue growth remaining at current levels (+~13%), which implies an FY25 FCF of ~$500 million.

Earlier this month, the company reported second-quarter FY23 revenue growth of 13% year-on-year to $389.98 million. 

2Q Partner subscribers increased +35% relative to revenue +36% y/y, providing much-needed insight into segment mechanics and suggesting potential upside relative to the analyst's prior ARPS expectations, Zgutowicz adds.

Additionally, Wix provided greater insight into go-forward GPV growth dynamics, stating partners comprise 43% of total company GPV, appreciating at a +50% trailing three-year CAGR. 

The analyst increased the company's FY23 non-GAAP operating profit modestly while raising FY24/FY25 non-GAAP operating income by +7%/+25%, respectively.

Zgutowicz raised estimates for the company's FY25 FCF margin from 19.9% to 23.8%, notably 120 bps below management's target. 

The analyst thinks although the FY25 FCF estimate is 9% below Wix's base target, Zgutowicz believes shares are materially under-valued even at these lower expectations.

Price Action: WIX shares are trading lower by 2.25% to $90.01 on the last check Friday.