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Will Subscriber Base Growth Aid Wix.com's (WIX) Q2 Earnings?

Zacks Equity Research

Wix.com Ltd. WIX is scheduled to report second-quarter 2019 results on Jul 24.

Notably, the company beat the Zacks Consensus Estimate in three of the trailing four quarters, with an average positive surprise of 38.1%.

Past-Quarter Performance

In the first quarter, Wix reported non-GAAP earnings of 3 cents per share, missing the Zacks Consensus Estimate by 66.7%. However, the bottom line showed an improvement from a loss of 6 cents reported in the year-ago quarter.

Total revenues surged 27% year over year to $174.3 million, surpassing the Zacks Consensus Estimate of $172.97 million.

Further, an expanding premium subscriber base is infusing growth in average revenue per subscription (ARPS) and instilling confidence in the stock. Notably, shares of Wix.com have returned 61.5% year to date, substantially outperforming the industry’s rally of 31.1%.

Guidance & Estimates

For the second quarter, the company expects revenues in the range of $182 million to $184 million, indicating an improvement of 25-26% from the year-ago quarter. The Zacks Consensus Estimate for revenues stands at $183.78 million, suggesting growth of 25.8% from the prior-year quarter.

Collections are projected to be in the band of $197 million to $199 million, suggesting growth in the range of 23-24% in the year-ago quarter. Meanwhile, the Zacks Consensus Estimate for Collections stands at $198 million.

The Zacks Consensus Estimate for second-quarter earnings is pegged at 17 cents, unchanged for the last 30 days. This suggests decline of about 41.4% from year-ago reported figure.

Let’s see how things are shaping up prior to this announcement.

Factors Likely to Influence Q2 Results

Wix is striving to expand premium subscriber base with product roll outs and enhancements of existing portfolio of services. These user-friendly applications aimed at meeting the requirements of dynamic retail environment, are favoring growth of overall user and subscription base. These initiatives are expected to positively impact the to-be-reported quarter’s results.

Markedly, in the last reported quarter, the company witnessed better-than-expected conversion and retention in user cohorts. The company added a total of 180,000 net premium subscriptions in the reported quarter, which came in at 4.2 million as of Mar 31, 2019 (up 21% year over year). This trend is expected to continue in the to-be-reported quarter.

Notably, the Zacks Consensus Estimate for number of premium subscriptions is pegged at approximately 4.29 million for period ended Jun 30, 2019.

The company recently enhanced Wix Code with new functionalities and rebranded it as Corvid by Wix. The renewed product is designed to aid developers manage their workflow in a streamlined manner. This is expected to aid the upcoming quarterly results.

Moreover, incremental adoption of innovative digital services including Wix Editor, Wix ADI, Wix Logo Maker, Wix Answers, Ascend by Wix, Wix Turbo, Wix Payments, among others are expected to bolster the top line in the second quarter.

Additionally, in the quarter under review, Wix announced opening of a Customer Support Centre in Dublin, Ireland, marking its first office in Western Europe. The centre is aimed at improving the company’s international market reach, which favors growth prospects.

However, increasing investments on product development, infrastructure and platform are likely to weigh on the company’s bottom line.

Wix.com Ltd. Price and EPS Surprise


Wix.com Ltd. Price and EPS Surprise

Wix.com Ltd. price-eps-surprise | Wix.com Ltd. Quote

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or #5) are best avoided.

Wix.com has a Zacks Rank #3 and an Earnings ESP of 0.00%, which makes surprise prediction difficult. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are some stocks you may consider, as our proven model shows that these have the right combination of elements to post an earnings beat this quarter.

Helix Energy Solutions Group, Inc. HLX has an Earnings ESP of +7.61% and a Zacks Rank #1. The company is slated to report second-quarter 2019 earnings on Jul 24. You can see the complete list of today’s Zacks #1 Rank stocks here.

Warrior Met Coal, Inc. HCC has an Earnings ESP of +8.66% and a Zacks Rank #2. The company is scheduled to report second-quarter 2019 earnings on Jul 31.

CGI Group, Inc. GIB has an Earnings ESP of +1.27% and a Zacks Rank #2. The company is set to report third-quarter 2019 earnings on Jul 31.

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