WIX
Wix.com shares were last trading up 12% in the mid-morning trading session as investors cheered activist investor Starboard Value taking a 9% equity position in the Israeli web development and management firm. The company also reported second quarter results that broadly beat estimates. Starboard said it took the position because it believed shares were undervalued and the company represented an attractive investment opportunity.
Wix shares are down 60% over the past 52 weeks, compared with a 26% decline in the Russell 3000 Computer Services subsector. Despite the lagging performance, Starboard’s position in the company could provide a lift to investor sentiment. Sell-side Wall Street analysts also welcomed the activist’s stake. The company trades at 3 times forward revenue estimates, which is considered cheap in the applications software industry.
Given the positive changes the activist’s stakes have brought about in other companies, such as Mellanox Technologies, Symantec and Darden Restaurants (the parent company of Olive Garden and Longhorn Steakhouse,) investors could be hoping that the addition of a strong independent voice could lead to greater value creation at Wix. Starboard has typically encouraged its investee companies to cut costs and increase shareholder return through buybacks.
Trading volume at the time of writing surged to 1.9 million shares traded, relative to the 220 thousand shares traded on average over the past 20 days, representing a nearly 9-fold increase. Shares in the company are down 80% from all-time highs, representing the value proposition for savvy investors. Management has also pledged recently to boost free cash flow margins to 20% and to strengthen its partnerships with adjacent companies.
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