Wix said customers aren't sure whether they should create new online stores, or expand with outlets, services, and events in the bricks-and-mortar world.
DreamstimeWix. com shares are taking a beating after the provider of website creation software trimmed its financial forecasts for the full year and some customers paused in developing new sites.
For the second quarter, Wix (ticker: WIX) posted revenue of $316 million, up 34% from a year earlier, and slightly ahead of the $312 million consensus forecast on Wall Street. The company posted an adjusted loss of 20 cents a share, narrower than the 37 cents analysts expected. Under generally accepted accounting principles, earnings were 66 cents a share, reflecting $110 million in unrealized gains on equity holdings, mostly from Monday.com, which went public in June.
“As the story of the pandemic continues to evolve, there is an uncertainty whether we are at the end of it, or if there is a massive new wave coming again. For our users, this uncertainty means that they don’t know if they should create new online or offline stores, services and events,” Avishai Abrahami, co-founder and CEO, said in a news release. “The result of this uncertainty, for us, is a mild slowdown in the creation of new web presences, which is reflected in our financials, where we came in at the low end of our expectations.”
Wix stock was off 19% to $209.50 near midday.
For the third quarter, the company is projecting revenue of $311 million to $317 million, below the consensus call for $325 million. Wix reduced its revenue outlook for the full year to a range of $1.255 billion to $1.27 billion, from a previous range of $1.28 billion to $1.29 billion. Full-year free cash flow is expected to be between $35 million and $40 million, down from the previous forecast of $62 million to $72 million.
The company said that the top of the full-year guidance range reflects a potential improvement to the rates at which it attracts users, and users become subscribers, while the low end reflects the possibility that conditions will remain uncertain, “resulting in further declines in new user additions, and that certain partnerships in our pipeline do not close by the end of 2021.”
CFO Lior Shemesh said in a statement that the company saw “more headwinds in the back half of the quarter than we expected.” He added that Wix adjusted its forecasts for the rest of the year “to account for continued uncertainty around the pandemic as well as the timing of B2B partnership agreements.”
Wedbush analyst Ygal Arounian said in a research note that Wix is saying that businesses are “freezing up on what way to invest,” online or in store, and are “therefore hitting pause.”
He said the situation reflects near-term uncertainty, and “businesses taking a bit of a break,” rather than any long-term change in fundamentals. “In the near-term it is clear that trends are at least temporarily slowing and that is definitely a challenge,” he wrote.
Arounian maintained an Outperform rating on the stock with a target of $340 for the price.
Write to Eric J. Savitz at eric.savitz@barrons.com
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Wix Stock Is Dropping as Customers Slow Creation of Websites - Barron's
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