Shares of Wix.com (WIX 19.87%) took a hard fall on Wednesday, Nov. 19. The Tel Aviv-based company, which provides software-as-a-service (SaaS) tools for modern web development, reported Q3 earnings early in the morning. The results exceeded Wall Street's expectations, but investors weren't buying it. The stock was down by 21.7% around 2:30 p.m. ET.
NASDAQ: WIX
Key Data Points
The numbers don't tell the whole story
There wasn't much wrong with Wix's headline figures. Q3 revenue rose 14% year-over-year to $505.2 million. Adjusted earnings jumped from $1.50 to $1.68 per diluted share. Your average analyst would have settled for earnings near $1.46 per share on revenues in the neighborhood of $502.5 million.
Management also raised its full-year revenue and order bookings guidance by about $10 million each. That's a drop in the $2.0 billion bucket (for both metrics) but still a positive move.
The stock is now at two-year lows following a beat-and-raise report. However, the price drop makes sense for two reasons if you dig a little deeper.
- The Base44 vibe coding app is rapidly changing how Wix runs its business. A heavy Base44 marketing blitz is weighing on Wix's operating margins, and the company now seems to prefer month-by-month subscriptions over more predictable long-term contracts. Investors worry that these changes could be mistakes in the long run.
- The Base44 focus also undermined Wix's focus on a new "flagship product," which was originally expected for release in the summer of 2025. CEO Avishai Abrahami is "clearly unhappy" that he can't finish this exciting release yet, as he pushed the publishing date back to 2026. This may have been the main reason why investors backed away from the Wix report.
Image source: Getty Images.
Is Wix stock a buy after the 22% drop?
Wix shares are now trading at 14 times forward earnings estimates and 10.4 times free cash flow. These valuation ratios look tempting at first glance, but the company's sales are only growing by roughly 14% a year. The stock is fairly valued after today's drop, and I'm being charitable with my forward-looking estimates, using them twice here.
That could change if Base44 and the as-yet-unannounced "flagship product" can make Wix the king of vibe coding. But all the cool developer kids are already using artificial intelligence (AI) tools to boost their web development skills (the hallmark of a vibe coder), and agentic AI from the standard Magnificent 7 giants poses a direct threat to Wix's vibe coding ambitions.
Wall Street was looking for firmer evidence of rekindled business growth, and Wix couldn't deliver it today. The stock may be worth a small nibble at these fairly reasonable prices, but I don't recommend rushing to Wix's stock-buying window.
