Wix Posts Mixed 1Q; Higher Marketing Spend Needed As Customers Turn To AI

Shares of Wix.Com Ltd (NASDAQ:WIX) tanked in early trading on Thursday, after the company Wednesday reported downbeat first-quarter results. Here are the key analyst insights: RBC Capital Markets analyst Brad Erickson downgraded the rating from Outperform to Sector Perform, and cut the price target from $90 to $60. Cantor Fitzgerald analyst Deepak Mathivanan reiterated an Overweight rating, while slashing the price target from $110 to $70. Needham analyst Bernie McTernan maintained a Buy rating, while reducing the price target from $115 to $80. Check out other analyst stock ratings. RBC Capital Markets: Wix results reflected challenges, highlighting concerns around consumers increasingly shifting to AI tools from traditional web design. The Base44 acquisition seemed to align with this trend, Erickson said. But RBC “underestimated the sustained margin compression this would cause," he added. Base44 is growing fast, but this has come with high marketing spend and compute costs, the analyst stated. The company expects partner weakness to continue, with agencies facing headwinds from "vibe coding" (people no longer needing code and, instead, just explaining their desired aesthetics to AI), which is "amounts to a shrinking reseller channel with the success of WIX’s products having less control over the outcome," he further wrote. Cantor Fitzgerald: Wix reported its bookings and revenue largely in-line with street estimates, Mathivanan said. He added, however, that non-GAAP operating income of $49 million was lower than expected due to "incremental marketing investments." Driven by healthy demand Base44 reached ARR (annual recurring revenue) of $150 million in May. That’s up from $100 million in March, while the partner segment's growth decelerated further, the analyst stated. "WIX's OI margin has eroded sharply over the last four quarters," he further wrote. Needham: Wix's core business decelerated and margins contracted in the first quarter, McTernan said. Subscription revenue growth, excluding Base44, decelerated to 7% from 9% in the previous quarter. That could fuel concerns over the company being "disintermediated by AI," he added. Base44 was a "meaningful driver" of new cohort bookings of $52 million in the first quarter. It grew 46% year-on-year, "with management noting better retention and positive mix shift toward annual subs," the analyst wrote. Gross margin headwinds remain, given higher marketing spend and acquisition earnouts, he further stated. WIX Price Action: Shares of Wix.Com had declined by 1.99% to $54.22 at the time of publication on Thursday. Read Also: Earnings Disaster: Why Wall Street Is Dumping Wix Stock