Wix Stock Gains as Analysts Re-evaluate Growth Prospects

Wix's acquired application development platform, Base44, is showing significant improvement, moving from near zero profit per dollar of revenue to an expected 60% gross margin in the second half of the year. This turnaround is attributed partly to Base1, a proprietary language model developed by Base44 that reduces operating costs. Wall Street analysts are beginning to factor this positive development into their valuations.

Investment bank Cantor has raised its price target for Wix shares to $90, a 17% increase, maintaining an "overweight" recommendation. Analyst Deepak Mathivanan anticipates that Wix will report stronger-than-expected third-quarter bookings and revenues next month, noting that currency exchange rate impacts have lessened and Base44's growth remains robust. Cantor forecasts low double-digit growth for the fourth quarter and expects management to outline its 2027 strategy.

Oppenheimer has also shown renewed confidence, reinstating Wix on its list of recommended Israeli stocks with a $85 price target. The firm highlights Base44's achievement of $100 million in annualized recurring revenue and Wix's strategic expansion from website building to application development. Despite concerns that AI could disrupt Wix's core business, analysts at Cantor and Oppenheimer believe the company's strong foundation, including nearly $2 billion in annual recurring revenue and 317 million registered users, positions it for continued growth.

Analysts note that Wix's stock, trading at a forward P/E ratio of less than 11 for 2027, is undervalued compared to industry peers. This valuation gap reflects investor apprehension about AI's impact on its established business. Wix's stock has recovered significantly from its yearly low of around $40, though it still shows a year-to-date loss of about 25%. Recent gains were partly driven by the integration of Wix's AI agent system, Symphony, with Stripe's agent wallet, enabling agents to manage payments and inventory, which boosted the stock by approximately 7% on the announcement.

Despite recent positive trends, Wix has faced challenges, including heavy investments in Base44, increased marketing expenses impacting profitability, and a slowdown in partner activity. In May, the company announced layoffs of about 1,000 employees, roughly 20% of its workforce, citing currency fluctuations and structural changes due to AI tools. This was accompanied by a lowered forecast for low double-digit annual order growth. The company is implementing cost-saving measures, expecting to save around $70 million this year, reaching an annualized rate of $150 million. Free cash flow projections have been raised to approximately $420 million, excluding acquisition and restructuring costs.

A significant concern for investors remains Wix's balance sheet following a $1.6 billion share buyback in March at a price of $92 per share, which resulted in net debt. The core question for Wix is whether AI tools that simplify website and app creation will erode its core business faster than Base44 can generate new revenue. Both Cantor and Oppenheimer believe the balance favors Wix.