The combination of disappointing first-quarter results and a clutch of bearish analyst updates put some real hurt on Wix.com (WIX 3.71%) in the past few days. Over the course of the trading week, the DIY web design facilitator's shares fell by 31%, according to data compiled by S&P Global Market Intelligence.
Double-digit revenue growth, but...
Wix's earnings report was made public early on Wednesday morning. The company's revenue for the quarter was $541 million, while total bookings were $585 million. Those figures were up a respective 14% and 15%, respectively, year over year. However, analysts were collectively modeling just over $544 million on the top line.
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The story was quite different for profitability not in accordance with generally accepted accounting principles (GAAP). This declined precipitously, falling to under $42.5 million, or $0.68 per share, from the year-ago quarter's nearly $94 million. That badly missed the consensus pundit estimate of $1.22 per share.
That bottom-line swoon and whiff raised concern not only among the investing community, but with those professional Wix-watchers. Just after those earnings were published, several analysts downgraded their recommendations, while others felt obliged to reduce their price targets.
Among the downgrading parties were influential banks Wells Fargo and Citigroup, both of which changed their ratings on Wix from the equivalent of buy to neutral.
NASDAQ: WIX
Key Data Points
The arrival of a rival
Wix's poorly received report came on the heels of a discouraging April for the company, a month marked by the announced rollout of Anthropic's Claude Design. This artificial intelligence (AI)-fueled offering from the prominent developer is, understandably, considered to be a threat to Wix's business. The company has yet to make a compelling case to the contrary.
Although I'd point out that Wix continues to grow its revenue, it's a company that's starting to look increasingly vulnerable to disruption -- whether that comes from Claude Design or another competitive solution. I think this is a stock to avoid just now.
