- Needham analyst Bernie McTernan reiterated a Buy rating and $85 price target on Wix.com Ltd (NASDAQ:WIX) following a round of web developer checks.
- He spoke with 22 developers in the WIX Marketplace to shed light on the broader funnel. They did not indicate any improvement.
- Failure of the funnel to return puts his 2H'22E and '23E estimates at risk.
- In a note titled "Developer Checks Point to Continued Funnel Weakness," he provided a scenario analysis contemplating the funnel lower for longer and negatively impacting his adjusted EBITDA estimates by -9% and -18% in '22E and '23E, respectively.
- That said, the stock looks cheap to him on his '23E estimate, even in his bear case scenario.
- He thinks the subscription nature of the business would support relative outperformance in a worsening economy.
- Utilizing its freemium-based business model, Wix's broad funnel approach to user acquisition is attractive through both a value creation and marketing efficiency lens, in his view.
- He believes penetration of SMB websites is low and sees growth potential from companies being brought online and companies switching from existing domains to a more vertical-specific design-build.
- Moreover, consistent cohort behavior and further evidence of monetization abilities through a relatively inelastic consumer base raise his conviction in the sustainability of the long-term growth trajectory of the business in an already large, fragmented market.
- Price Action: WIX shares traded lower by 0.43% at $65.52 on the last check Wednesday.
