Morgan Stanley Sees Growth in Wix and Semrush Due to AI Trends

Wix and Semrush Upgraded by Morgan Stanley

Morgan Stanley has recently elevated its outlook on both Wix.Com Ltd (NASDAQ: WIX) and Semrush Holdings Inc (NYSE: SEMR), rating them as 'Overweight'. This change comes in light of their promising growth trajectories and perceived undervaluation in the market.

Wix's Potential Boost from AI Innovations

Wix is poised to gain significantly from advancements in artificial intelligence, particularly as small businesses and content creators harness tools like generative AI for web design and marketing. The company’s focus on driving subscription growth, alongside operational improvements and enhanced free cash flow, has led to a price target of $276, indicating a 25% potential upside. This places Wix shares attractively below their peers, which suggests that the market may be overlooking Wix’s capacity for quicker customer conversion and higher retention rates.

Enhanced Offerings for Small Businesses

The integration of AI into Wix's offerings enables small enterprises to build and refine their online presence more effectively. With user-friendly solutions that appeal to creators, the platform is set to revolutionize how businesses approach web development and marketing strategies.

Semrush: Driving Online Visibility

On the other hand, Semrush plays a vital role in enhancing online visibility through its comprehensive SEO and content marketing tools. As businesses increasingly prioritize digital presence, Semrush is well-positioned for ongoing growth. Morgan Stanley noted that challenges in the small business segment are easing, and there are new opportunities expanding within larger enterprise markets.

Recurring Revenue Model Supporting Growth

Semrush has established a robust recurring revenue model that allows it to maintain a strong revenue growth rate exceeding 20%. As the company continues to innovate, it remains that shares of Semrush are still at a significant discount when compared to competitors in the sector.

Positive Outlook for Technology Stocks

Analysts attribute their optimistic stance on both Wix and Semrush to the improving demand sparked by recovering economic conditions and the adoption of transformative technological cycles. As the forecast for spending becomes more favorable, both companies find themselves in an advantageous position to capitalize on existing market trends.

Value in Undervalued Stocks

With a strategic focus on software and operational agility, the potential for these companies to outperform more broadly valued software stocks remains high, suggesting possible future revaluation.

Frequently Asked Questions

What was the reason for Morgan Stanley's upgrade?

Morgan Stanley upgraded Wix and Semrush due to their strong growth potential and undervalued stock prices in the current market environment.

How is Wix leveraging AI in its business model?

Wix is incorporating AI-driven innovations that assist small businesses and creators in effective web design and marketing, enhancing their offerings significantly.

What is Semrush's main business focus?

Semrush primarily focuses on online visibility management, offering tools for SEO and content marketing that support businesses in improving their online presence.

What future growth is anticipated for Semrush?

The company is expected to continue its growth trajectory, bolstered by a recurring revenue model and an expanding enterprise segment.

Why are analysts optimistic about technology stocks?

Analysts are optimistic due to recovering economic conditions and a favorable outlook for tech spending, which positions companies like Wix and Semrush for potential success.

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