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Shares of Wix.com Ltd (NASDAQ:WIX) gained 10% early Monday after activist hedge fund Starboard Value disclosed a 9% stake in the company Friday afternoon and, according to reports from Reuters, spoke to the Israel-based website building platform about improving operations.
Starboard is said to support the company’s plans to become profitable and believes it can improve its margins and grow further. Starboard does not plan to seek board seats at the time, it was added.
A Truist Securities analyst views the activist involvement as a positive development and said it can “lead to improvements in execution and help unlock value in the business as Wix pursues its MT FCF margin goal of 20% along with healthy top line growth.”
Based on Starboard’s track record, he thinks it would initially look to work with the board collaboratively on a number of fronts including: a) driving operational execution/focus, b) improving margins and free cash flow (potentially pushing for higher MT FCF margin vs 20% sought by mgt), c) exploring strategic, value generating partnerships, d) reduced share dilution from SBC expense and e) efficient capital allocation (including potentially more aggressive share repurchases).
The analyst further notes that Starboard’s stake in Wix comes after the hedge fund took a similar position in GoDaddy Inc (NYSE:GDDY) in December.
Overall, the analyst believes the activist can help unlock “meaningful value” in Wix and reiterated a Buy rating and $120 price target.
Wix.com issued the following statement to Investing.com related to Starboard Value’s 9% activist stake.
“We respect the views of all Wix shareholders and regularly speak with our investors about our business strategy, performance, and long-term objectives,” a Wix spokesperson told Investing.com. “We have engaged constructively with representatives from Starboard since we became aware of its investment, and we intend to continue the constructive engagement.”
