The early on pandemic tide in web site build and new on-line activity appears to have farseeing since dissipated. Shares of top web site creation company Wix.com ( WIX -9.35 % ) have been suffering as its once fast-paced growth trajectory settles down to a more easy gradient of expansion. The stock fell by 16.5 % in May, according to data from S & P Global Market Intelligence, after its first-quarter earnings report left many investors worried .
After a ardent tend of more than 30 % year-over-year growth for much of 2020 and 2021, Wix reported gross growth of just 16 % in 2021 ‘s fourth stern. flush worse, management projected that gross would grow at merely an 11 % to 13 % footstep in Q1 2022 — though it said it expected growth to accelerate as the year progresses .
so here ‘s the good newsworthiness : When it delivered its Q1 numbers on May 15, Wix actually bested its guidance, reporting 14 % growth in gross to $ 342 million. The regretful news, though, was its update guidance. tax income for the year is immediately expected to be up just 10 % to 13 %. An acceleration in its expansion rate is, obviously, not in the cards. Granted, the company ‘s suspension of business natural process in Russia is presenting a headwind, as are unfavorable changes in foreign currency exchange rates. however, even backing out those issues, Wix said its full-year growth bode would only be 12 % to 15 % .
Adding to the angst among shareholders was that Wix ‘s Q1 absolve cash flow was negative $ 33.6 million. About $ 18 million of that negative result was attributable to the structure of the company ‘s new headquarter, but it ‘s still not the screen of result investors were looking for. Wix had previously forecast that its exempt cash flow margin would be about 5 % for 2022, so it will have to dig itself out of a hole to meet that guidance.
Web content creation for small businesses is n’t going anywhere, and Wix has a impregnable presence and ball-shaped name recognition in its space. Customers are still spending at a healthy pace. however, Wix has matured into a more slow-and-steady business — and one that needs to prove it can turn a profit.
The board of directors approved a plan that they believe will allow the caller to achieve a rid cash flow margin of 20 % by 2025, but that ‘s a long way down the road.
If Wix can pull its plan off, shares at today ‘s levels could be a antic long-run value. right now, Wix trades at merely 3.5 times trailing 12-month sales. however, given its lack of profitableness and the fact that its gross growth expectations are decelerating, it ‘s hard for me to get besides excited about this stock at this particular juncture. I do n’t plan on selling my position at this here and now, but I wo n’t be adding to it either .