Today witnessed an uptick in Wix.com's share price, reaching a three-year peak.
Wix.com's (WIX -2.18%) shares surged on Wednesday following the Israeli tech giant's third-quarter 2024 financial report release. By 10:50 a.m. ET, the stock had climbed an impressive 13.7%, breaching the $200 mark per share for the first time since late 2021.
Wix exceeded expectations in Q3
In the third quarter, Wix managed to generate more revenue than forecasted analysts, along with higher profits. The company's innovative machine learning and AI technology has been instrumental in attracting more customers to create websites and embrace additional software offerings.
Leveraging the increased adoption of its products, Wix's management seized the opportunity to revise its full-year forecast for various key metrics in Q3, following similar adjustments in the previous quarter. The company initially projected full-year revenue growth of 13%-14% but now anticipates a 14%-15% increase. Furthermore, it expects a free cash flow margin of 27%-28%, a significant improvement over its previous projection of 26%-27%.
In essence, Wix's Q3 performance was an example of what investors refer to as a "beat-and-raise" quarter, which tends to result in strong stock performance, as demonstrated by Wix's share price boost today.
Wix strikes a balance between growth and profitability
Investors monitoring software companies like Wix often pay close attention to something known as the "rule of 40." It serves as a crude but simple tool to balance growth rate expectations and free-cash-flow generation aspirations. Optimal performance is typically considered when the growth rate and margin sum up to at least 40%, indicating a harmonious blend of growth and profitability.
Wix appears on course to fulfill the "rule of 40" in 2024, with its target growth rate of 14%-15% and a margin at or above 27%-28%. More crucially, the company achieved this goal a year ahead of schedule, a factor that added to the market's optimism on Wednesday.
With the improved financial outlook, investors are now eyeing potential opportunities for further investing in Wix. The company's projected free cash flow margin of 27%-28% indicates a strong financial position and potential for increased returns on investment.
The impressive Q3 performance and the company's ability to strike a balance between growth and profitability have boosted Wix's appeal among finance-focused investors.
