Key points:
- WIX shares drop on weaker-than-expected Q1 earnings
- The company had earnings pegged at a loss of $0.72 on a $0.61 analyst consensus
- A cutback in large investments should allow more growth in the bottom line
Wix (NASDAQ: WIX), the website creator for burgeoning small businesses, posted weaker than expected first-quarter earnings before the opening bell this morning, citing weaker global economic growth bred by market volatility and looming uncertainty. The company’s belief in large, long-term investments has meant the website creator has struggled for cash in the past, but according to management, this should all be about to change.
The company recorded a total quarterly loss of $0.72 per share on a consensus of $0.61. Revenue just tipped over analyst expectations, coming in at $341M on a consensus of $340M. All focus was on the company’s bottom line this morning, which has seen large, long-term spending drag down company profitability. The company has invested heavily since its founding in 2006, but officials are finally stating that “the fruits” of all this are finally on the horizon. This all comes as a time when Wix has has to endure a revenue hit from its Russian exit, totalling around $3M.
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A particular roadmap hasn’t been laid out just yet, but the company is expected to provide further details of a three-year plan at an analyst day on Thursday – investors should hence stay vigilant for further updates. For Q2, Wix hopes to secure revenue of between $342M-$346M, which although would translate to annual growth of 8-10%, still sits below analyst expectations of $356M.
WIX shares tanked nearly 10% on the news, but investors should be looking at the positives. An eventual cutback in hefty investments should mean less pressure on the company's bottom line; closing the gap to profit. Also, website creation will only continue to grow, with Wix being well positioned as a clear market competitor. Currently down 72% year over year, will Wix see an uptick in its downtrodden share price soon?