Actions of Wix.com (NASDAQ: WIX) rose more than 10% this week after a large rise in tech stocks and bullish sentiment from a Wall Street analyst. At 2:32 p.m. EDT, the stock was up 10.3% for the week on Friday.
This week, Morgan Stanley analysts launched an overweight (which means buy) on Wix.com stock, with a price target of $ 339 per share. Wix is currently trading at around $ 305 per share. With no significant news from the company, this improved price target was likely a major reason for the stock’s movement over the past few days.
Another reason investors bought Wix shares was the bullish data released on Shopify (NYSE: SHOP), one of Wix’s e-commerce competitors. Third-party data from RBC Capital Markets revealed that Shopify merchants grew 39% year-over-year in the second quarter, an acceleration from growth in the first quarter. Given that Wix offers e-commerce products similar to Shopify, investors can assume that Wix will see strong growth this quarter as well.
With the recent moves, Wix stock is now trading at a price-to-sell (P / S) of 15.7 and has little history of profitability. Given this high valuation, investors should expect strong growth from Wix over the next several years if the stock is to generate positive returns for shareholders. If that doesn’t happen, the stock is likely to be a big loser for the wider market over the next decade.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.