Momentum investing, a strategy that revolves around tracking a stock’s recent trends, is grounded in the concept of “buying high, with the expectation of selling even higher.” Investors employing this approach rely on identifying and capitalizing on a stock’s price movements, with the belief that once a stock establishes a direction, it is likely to continue in that trajectory. This strategy seeks to exploit trends, aiming for timely and profitable trades.
Navigating Momentum Investing:
Momentum investing, while widely recognized, is not without its challenges, particularly in the debate surrounding the selection of the most relevant metrics. However, the Zacks Momentum Style Score, a component of the Zacks Style Scores, offers valuable insights into this complex arena.
In this analysis, we delve into Wix.com (WIX), a company currently boasting a Momentum Style Score of B. Our exploration centers on two pivotal components of the Momentum Style Score: price change and earnings estimate revisions.
Synergy with the Zacks Rank:
It is essential to acknowledge that Style Scores complement the Zacks Rank, a well-established stock rating system celebrated for its history of outperformance. Wix.com presently carries a Zacks Rank of #1 (Strong Buy). Historical data underscores that stocks holding Zacks Rank #1 (Strong Buy) and #2 (Buy) status, coupled with Style Scores of A or B, have consistently outperformed the market over the ensuing one-month period.
Unpacking Momentum Potential:
To assess WIX as a promising momentum pick, we scrutinize Momentum Style elements, particularly focusing on its short-term price performance. This aspect not only gauges current market sentiment but also discerns the balance between buyers and sellers.
Over the past week, WIX has demonstrated a robust performance, with shares surging by 5.38%. In contrast, the Zacks Computers – IT Services industry, during the same period, reported a 2.96% gain. A favorable long-term perspective further enhances WIX’s appeal, as its monthly price change of 3.45% significantly outpaces the industry’s 0.28% performance.
Expanding our horizon to encompass longer-term metrics, we find that Wix.com has delivered impressive results. Over the past quarter, its shares have appreciated by 32.02%, while the yearly gain stands at an impressive 59.3%. This substantial growth far outpaces the S&P 500’s modest increases of 7.37% and 15.49% for the corresponding periods.
Volume Matters:
Volume plays a crucial role in assessing momentum. The 20-day average trading volume serves as a reliable indicator for establishing a price-to-volume baseline. An ascending stock with above-average volume typically indicates a bullish trend, while a declining stock with higher-than-average volume is often considered bearish. Presently, WIX boasts an average 20-day trading volume of 597,729 shares, further reinforcing its momentum trajectory.
Earnings Outlook:
The Zacks Momentum Style Score extends its purview to earnings estimates, recognizing their significance. Earnings forecasts are pivotal contributors to the Zacks Rank, emphasizing the importance of a favorable trajectory. Notably, WIX has exhibited encouraging signs in this aspect.
Over the past two months, Wix.com has witnessed upward revisions in four earnings estimates for the full year, with none moving in the opposite direction. This upward momentum has translated into an enhanced consensus estimate, escalating from $2.31 to $3.35 within the last 60 days. Looking ahead to the next fiscal year, WIX continues to shine, with six estimates trending upwards and no downward revisions during the same timeframe.
Conclusion:
Taking into account these critical elements, it becomes evident why Wix.com secures a coveted position as a #1 (Strong Buy) stock with a Momentum Score of B. For investors seeking fresh opportunities poised for near-term growth, Wix.com deserves a prominent place on their watchlist. With a compelling mix of momentum, earnings potential, and industry-leading rank, Wix.com exemplifies the attributes of a promising investment prospect.
