Shares of Wix.com Ltd. (NASDAQ: WIX) ran 16.6% higher in January, according to data provided by S&P Global Market Intelligence. This run-up gained back ground the stock surrendered to close out 2019. Analyst downgrades and weak fourth-quarter revenue guidance had sent the stock down, but as the new year dawned, Bank of America turned bullish on the stock.
Further, Wix.com might be bullish on itself at the moment, as it's cleared to buy back some of its stock.
Some analysts had lowered Wix's price targets on slowing revenue growth. The main culprit is foreign exchange rates. Wix is based in Israel, but 55% and 25% of revenue come from North America and Europe, respectively. When it reported third-quarter results, it updated full-year guidance to reflect these currency headwinds. Previous full-year 2019 guidance called for revenue of $761 million to $765 million. This was revised to $761 million-$763 million. It wasn't so much a guidance reduction as putting a cap on the high end of guidance. Even still, Wall Street turned bearish on Wix.
Bank of America's recommendation is a shift from that recent bearish sentiment. Bank of America has a research product called the Bank of America US 1 list. It's a list of stocks the bank considers good investments for its members. A few companies, including Wix, were added to this list in early January. Wix's stock jumped on the news.
Also possibly adding a minor positive impact to Wix's stock in January is a stock buyback. On Dec. 30, Wix received court approval to extend a $100 million stock buyback program. Under the original plan, the buyback would have expired at the end of 2019; now the company is authorized to continue until June 2020.
While investors are undoubtedly pleased with a 17% gain, the news that dropped in January isn't very material to an investing thesis. Analysts frequently upgrade or downgrade stocks, and most focus on 12-month targets rather than the long term. But a long-term view is crucial when investing in stocks.
For now, Wix is attracting new users and increasing existing user monetization by introducing new products. When the company reports earnings on Feb. 20, I would focus more on those metrics than currency headwinds.
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