Shopify, Wix, GoDaddy, and Squarespace Eye Strong Second Quarter Performance
The second quarter of 2024 brings a wave of optimism for web platforms, as evidenced by recent reports on Shopify (SHOP), Wix (WIX), GoDaddy (GDDY), and Squarespace (SQSP). Key performance indicators across these platforms show positive trends, driven by robust gross subscriber additions, new revenue streams, and shorter sales cycles, which mitigate the risk of deal slippage. Despite some challenges, the overall sentiment remains strong.
Shopify: Riding the Wave of Strong 3P Data and Optimistic Projections
Shopify continues to enjoy a favorable outlook thanks to solid top-line dynamics and encouraging third-party (3P) data points. The company’s CEO, Tobi Lutke, further fueled investor confidence with his tweet about achieving $1 trillion in cumulative Gross Merchandise Volume (GMV). Investors are eyeing a 2-3 percentage point beat in top-line growth, supported by the strong 3P data.
Despite the optimism, there is some debate over the company’s operating expenses (OpEx) growth in the third quarter. Opinions vary on whether OpEx will remain flat or grow modestly, driven by continued marketing investments and the upcoming Summit event. Nonetheless, management’s guidance on OpEx as a percentage of revenue is expected to mirror sequential growth, potentially exceeding buy-side expectations.
One point of concern for Shopify is the 5% year-over-year decline in web traffic, attributed to a tough comparison period. However, the second quarter’s foreign exchange (FX) impact is estimated at -$1.2 million, aligning with peer averages. Investors remain hopeful for 20%+ top-line growth in the third quarter, validating recent marketing investments.
Wix: Positive Sentiment Despite Tough Comparisons
Wix has garnered a positive sentiment, although there are concerns about tougher second-quarter bookings comparisons and achieving a ramp-up in the second half of the year. Investors anticipate second-quarter revenue at the high end of guidance, coupled with potential EBIT upside.
While Wix experienced an 8 percentage point quarter-over-quarter moderation in website traffic growth to -10% year-over-year, the company’s FX impact for the second quarter is estimated at -$2.8 million. Investors are optimistic that any second-quarter revenue upside could extend into the full-year 2024 outlook by $7-8 million and positively impact free cash flow (FCF).
The third quarter’s revenue is expected to slightly surpass the Street’s expectations, satisfying investors. However, bookings commentary is not expected to push beyond 16%, with Wix clarifying that the second-half acceleration meant “up to 16%”.
GoDaddy: Strong Lead Generation and AI Tailwinds
GoDaddy’s investor sentiment remains positive, driven by strong lead generation, pricing, and artificial intelligence (AI) tailwinds. Despite cautious quarterly expectations, investors anticipate a slight top-line beat and margin upside for the second quarter.
GoDaddy’s website traffic decelerated by 3 percentage points quarter-over-quarter but still grew by 9% year-over-year. The second quarter’s FX tailwind is estimated at $2.0 million, above the peer average. Investors expect management to maintain a conservative revenue outlook while reiterating a 31% NEBITDA exit rate.
Squarespace: Momentum Amid Acquisition News
Squarespace’s sentiment has been neutral following the announcement of its acquisition by Permira. Investors expect a modest top-line and margin beat for the second quarter, driven by strong net add activity.
The transaction with Permira is expected to close in the fourth quarter, with continued momentum anticipated from price increases in the second half of the year. Squarespace led its peers with a significant 44 percentage point quarter-over-quarter acceleration in website traffic growth, reaching 87% year-over-year.
A Positive Outlook with Cautious Optimism
The second quarter of 2024 presents a mixed yet largely positive picture for web platforms like Shopify, Wix, GoDaddy, and Squarespace. While each platform faces unique challenges, the overall sentiment is optimistic, bolstered by strong lead generation, favorable top-line dynamics, and strategic investments in marketing and AI.
Investors remain cautiously optimistic, closely monitoring operating expenses, revenue growth, and market trends. As the year progresses, these web platforms are well-positioned to capitalize on emerging opportunities, driving growth and delivering value to their stakeholders.
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