Wix.com shares plunge 25 per cent on weak first-quarter results

Wix.com shares fell 25.4 per cent on Wednesday following the release of first-quarter financial results that missed analyst expectations. The decline in the web-services company’s stock occurred despite broader market gains, with the S&P 500 rising 0.6 per cent and the Nasdaq Composite increasing 1.3 per cent. The stock had traded as low as a 32 per cent drop earlier in the session before settling at its closing levels.

The company reported non-GAAP adjusted earnings per share of $0.68, missing the average Wall Street estimate by $0.54. First-quarter sales totalled $541.17 million, falling short of the average target by $2.87 million. While revenue grew approximately 14 per cent year-on-year, the growth rate was softer than anticipated by investors and analysts.

Profitability metrics deteriorated notably during the quarter. Adjusted gross margin contracted to 66 per cent from 69 per cent in the prior-year quarter. More significantly, adjusted operating income margin dropped to 5 per cent from 21 per cent in the same period last year, suggesting weakening pricing power within the business.

Subscription growth for creative solutions decelerated during the quarter, and the company may be facing competitive pressures from AI-based alternatives. The Motley Fool, which has disclosed positions in and recommends Wix.com, noted that the weakening margins and decelerating growth were key factors in the market’s negative reaction to the report.

Despite the quarterly underperformance, Wix.com reaffirmed its full-year guidance, expecting an adjusted free-cash-flow margin in the low-to-mid-20 per cent range. If the company manages to hit that target and sustain that level of performance further out, analysts suggest the stock could see a significant rebound.