What Happened?
Shares of website building platform Wix (NASDAQ:WIX) fell 17.2% in the afternoon session after the company reported third-quarter results where a beat on revenue was overshadowed by a significant miss on operating income and deteriorating margins.
Although the company's revenue grew 13.6% year-on-year to $505.2 million, narrowly surpassing analyst expectations, investor focus shifted to profitability. Wix's operating margin swung to a negative 1.5%, a steep decline from the positive 5.8% margin reported in the same quarter last year, and its adjusted operating income also missed Wall Street's estimates. Furthermore, the company's revenue guidance for the next quarter was only in line with expectations, failing to provide a strong positive catalyst. This combination of an operating income miss and weakening profitability prompted a negative reaction from the market.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Wix? Access our full analysis report here.
What Is The Market Telling Us
Wix’s shares are very volatile and have had 24 moves greater than 5% over the last year. But moves this big are rare even for Wix and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 15 days ago when the stock dropped 3.6% on the news that markets became increasingly wary of high valuations following a significant AI-driven rally.
The tech-heavy Nasdaq fell approximately 1.4% as a wave of caution swept through the market. A key example of this trend is Palantir Technologies, which saw its shares drop around 7% despite reporting record quarterly results that surpassed analyst estimates and raising its full-year revenue outlook. This seemingly contradictory movement highlighted a broader sentiment shift. Investors appeared to be engaging in profit-taking, concerned that the recent surge in AI-related stocks had led to stretched valuations. This broader market caution affected high-growth technology companies that had previously surged on AI optimism but faced increased scrutiny, signaling a potential cooling-off period for the sector. Adding serious weight to this caution, leadership at both Goldman Sachs and Morgan Stanley highlighted the possibility of a correction in the equity markets over the next couple of years. Despite the euphoria driven by AI optimism and the promise of future rate cuts, these banks viewed this cooling-off period not as a disaster, but as a necessary and healthy feature of a long-term bull market.
Wix is down 52.2% since the beginning of the year, and at $103.58 per share, it is trading 58% below its 52-week high of $246.76 from January 2025. Investors who bought $1,000 worth of Wix’s shares 5 years ago would now be looking at an investment worth $402.49.
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