1 Forgotten Internet Stock Darling Rebounded 60% in 2023 -- Is It Too Late to Buy for 2024?

We've come a long way from 2020 and 2021 when digital economy stocks were soaring to impossible heights. Some of these stocks have ceased to exist. Others have fallen hard as the economy has reopened and rebuilt from the worst effects of the pandemic. And some forgotten companies are quietly making comebacks.

I almost forgot I had left shares of Wix.com (WIX -0.30%) in my portfolio, and I'm glad I did. The former website building and internet stock darling rebounded some 60% in 2023. Though the stock price does remain down nearly 70% from all-time highs reached in early 2021, management has put in the hard work and has Wix well on its way to sustainable growth. Far from being too late, Wix stock could actually be a solid buy for 2024.

Wix still a top website builder toolset

Wix isn't the fast-growing website builder and site management toolset it was in 2020 and 2021. That said, it's still making some notable waves in the e-commerce ocean. Revenue growth has been steadily reaccelerating throughout 2023, as management said it would.

Data source: Wix.com. YOT = Year over year.

Wix has been busy this past year, launching new solutions -- especially for web developers -- to fire its growth engine back up. In Q3 2023, revenue expansion was led by the Wix Partners program, a set of resources (including generative AI) for professionals that help businesses design and manage a web presence. In October 2023, Wix Studio (graphic design for website layouts) also completed its global launch. Q3 Partners revenue increased 38% year-over-year to $119 million.

Ongoing software integrations with Alphabet's Google, and new ones with Intuit's Mailchimp, are also helping.

But even better has been rapid progress on profitability. The last time I caught up with Wix, it was still putting in the early efforts to right-size its expenses after its pandemic-fueled growth spurt left it in a highly unprofitable position. In the last two quarters, though, Wix has turned a profit both on a free cash flow basis (or FCF, $45 million in Q3, an 11% FCF profit margin) and GAAP net income basis ($7 million in Q3). Wix expects to be profitable on a GAAP basis for the full year 2023.

Data by YCharts.

Is Wix stock a reasonable value?

Thanks to its better-than-expected growth and disciplined cost controls, Wix believes it is well ahead of schedule in reaching its goal of 25% or better FCF margin by 2025. In fact, the company could reach that milestone in 2024, as hinted in management's commentary on the outlook for the final months of 2023.

In fact, early estimates from Wall Street analysts have a minimum 20% FCF margin penciled in for 2024, which I believe is conservative if Wix management can stay focused on its new leaner operating model. But given these early expectations, Wix stock trades for about 19 times expected FCF.

Of course, Wix will need to prove it can achieve these numbers, all while sustaining its low-teens-percentage growth rate into the new year. But if you believe this outlook is achievable, Wix could be a solid internet and e-commerce stock worth buying again for 2024 and beyond. I plan to continue holding my position.