What Happened:
Shares of website design and e-commerce platform provider Wix.com (NASDAQ:WIX) jumped 6.17% in the afternoon. Earlier today, Microsoft revealed the pricing strategy for its new AI-powered tool for its Office software, called 365 Copilot. The tool, which can help users with tasks such as writing emails, creating presentations, and analyzing data, will cost $30 per user per month for some of its Office 365 customers. This is a big price increase for these customers, especially the E3 users who currently pay about $36 per user per month for Office 365. Microsoft CEO Satya Nadella said Copilot is the "third leg" of Office after Word, Excel and Teams. Analysts said the tool could boost Microsoft's cloud revenue by 20% by 2025. This announcement shows that Microsoft is confident in its AI capabilities and its ability to monetize them. The company is betting that its customers will see the value of Copilot and be willing to pay more for it. The tool could also attract new customers who are looking for an AI assistant to help them with their work. Overall, the higher-than-expected pricing could be a positive read-through for other tech names with AI products or features. Recently, Wix announced that it would launch a new feature called AI Site Generator, which will automatically create a website for the user based on their preferences and needs. The AI Site Generator is part of a suite of AI-powered features that Wix offers its users. In other news, the earnings season has gotten off to a good start, with Bank of America, Morgan Stanley, and BNY Mellon all reporting good results. It shows that despite some cautious macro signals and higher interest rates, banks are faring relatively well.
What is the market telling us:
Wix's shares are a little volatile and over the last year have had 32 moves greater than 5%. The previous big move was two months ago, when the stock gained 9.2% on the news that the company reported a "beat and raise" quarter. First quarter results surpassed analysts' expectations for revenue, operating income, free cash flow, and earnings per share. Revenue guidance for the next quarter and full year were also above Consensus. An additional positive aspect was the company's upward revision of the full-year free cash flow guidance, excluding HQ costs, now projected at $172 - $180 million. This reflects a significant improvement compared to the previous outlook of $152 - $162 million. Furthermore, the non-GAAP gross margin for the full year was raised to approximately 67%, surpassing the previous expectation of around 66%. These results and revisions highlight the company's strong performance and upbeat outlook going forward.
Wix is up 17.1% since the beginning of the year, but at $87 per share it is still trading 12.8% below its 52-week high of $99.81 from April 2023. Investors who bought $1,000 worth of Wix's shares 5 years ago would now be looking at an investment worth $813.24.
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