RBC Downgrades Wix, Sees Less Attractive Risk/Reward

Shares of Wix.Com Ltd WIX fell more than 6 percent after RBC Capital downgraded the stock to Sector Perform from Outperform on less attractive risk-reward.

Shares of WIX have achieved RBC's $45 price target. Year-to-date, WIX shares have "dramatically outperformed" the market by increasing over 97 percent vs. the S&P 500 which is up 7 percent.

"Given the steady improvement we have tracked with WIX's fundamentals, we believe this outperformance has been justified. However, with the stock now trading at 48X '16E EV/EBITDA and 6.5X '16E EV/Sales – amongst the highest multiples in the sector – we see valuation upside as limited from here," analyst Mark Mahaney wrote in a note.

Mahaney's positive take on the company's fundamentals remains intact given strong user base and collection growth. The analyst noted that the Wix is very well-positioned to address the online needs of SMBs in a budget-friendly manner.

The analyst reiterated his price target of $45, which is based on a 5.0x P/S multiple and a 25x EV/EBITDA multiple on RBC's 2017 estimates.

"We believe Wix's outlook for a 33% revenue CAGR and a 93% EBITDA CAGR between 2015 and 2018 justifies these multiples," Mahaney added.

At time of writing, shares of Wix dropped 6.07 percent to $42.54.