Wix Stock Rises 10% on Activist Investor Stake

  • Website development platform Wix (WIX) jumped double digits on Monday.
  • Activist investor Starboard Value LP built a 9% stake in the company.
  • The rise in WIX stock contrasts sharply with negative implications for e-commerce.
WIX stock - Wix Stock Rises 10% on Activist Investor Stake

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Apparently not letting dour economic news hinder opportunities, activist investor Starboard Value LP built a 9% stake in website development platform Wix (NASDAQ:WIX), prompting WIX stock to gain double digits on Monday. According to Reuters, “Starboard had been building the stake, and spoke to Wix about how it can improve operations.”

The news couldn’t have come at a better time for stakeholders of WIX stock. Per the news agency, the web platform “has been struggling with losses since the fourth quarter of 2021 amid a slowdown in e-commerce driven by rampant inflation and people making fewer purchases online in the wake of the COVID-19 pandemic. It has adopted a three-year cost-cutting program in a bid to boost its ailing stock price.”

Fortunately, sources close to the matter stated that Starboard supports Wix’s turnaround plans to become profitable. Further, the investment firm believes the company can improve its margins and expand the overall business footprint. According to data from Gurufocus, Wix features a loss of $987 million in its retained earnings line item.

Still, it’s worth noting that last month, Wix beat earnings estimates for Q2 2022. Prior to the disclosure, covering analysts anticipated the company would produce an earnings loss of 42 cents per share. However, Wix posted a loss of 14 cents.

As well, the company “stressed that these savings are not a one-time thing and are meant to be continually realized going forward,” per TipRanks.

Enthusiasm in WIX Stock Belies E-Commerce Risks

Another factor that brings encouragement to WIX stock is that Starboard supports the underlying business despite massive e-commerce risks. Specifically, investors reeled at last week’s pre-earnings disclosure of delivery services giant FedEx (NYSE:FDX).

Ultimately losing more than 21% of market value for the Sept. 16 session, FDX stock hemorrhaged as FedEx’s management team identified macroeconomic trends that “significantly worsened later in the quarter, both internationally and in the U.S.”

The bidding up of WIX stock also comes amid a tricky circumstance for the Federal Reserve. In late August, Fed chair Jerome Powell delivered his policy speech at the annual economic symposium at Jackson Hole, Wyoming. In it, Powell essentially articulated that the economy must absorb “some pain” now to avoid greater pain later.

However, last month generated a hotter-than-expected inflation report. This suggests the Fed may need to be more aggressive with its monetary tightening policy to control rising prices. At the same time, it must do so delicately, as becoming too hawkish could engineer a rough landing for the economy.

Nevertheless, Starboard building its stake in WIX stock implies significant trust in the underlying business.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.


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