Why Wix.com Stock Is Plummeting Today
Key Points
Wix.com's Q1 sales and earnings were worse than expected.
The business saw substantial declines for its adjusted gross margin and adjusted operating income margin.
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Wix.com (NASDAQ: WIX) stock is getting crushed in Wednesday's trading. The web-services company's share price was down 25.4% as of 3:10 p.m. ET despite the S&P 500 being up 0.6% and the Nasdaq Composite being up 1.3%. The stock had been down as much as 32% earlier in the day's trading.
Wix.com published its first-quarter results before the market opened this morning, and sales and earnings for the period came in worse than anticipated. While the company posted Q1 misses, it did reaffirm its full-year guidance.
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Wix.com whiffs on Q1 results
Wix.com recorded non-GAAP (adjusted) earnings per share of $0.68 on sales of $541.17 million in the first quarter. Adjusted earnings came in $0.54 per share below the average Wall Street analyst estimate, and sales missed the average target by $2.87 million. Revenue was still up roughly 14% year over year in the quarter, but growth was softer than expected -- and margins took a big step back. The company's adjusted gross margin declined to 66% from 69% in the prior-year quarter, and its adjusted operating income margin fell to 5% from 21% in last year's quarter.
What's next for Wix.com?
Wix.com saw subscription growth for its creative solutions decelerate last quarter, and the company's weakening margins suggest the business's pricing power is weakening. The company may be facing competitive pressures from AI-based alternatives. On the other hand, the company still expects to end the year with an adjusted free-cash-flow margin in a low-to-mid-20% range. If the company manages to hit that target and sustain that level of performance further out, the stock could see a significant rebound.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Wix.com. The Motley Fool has a disclosure policy.
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