TipRanks Smart Growth Portfolio #13: Drag and Win
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Dear Investors,
Welcome to the 13th edition of the Smart Growth Portfolio and Newsletter.
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Portfolio News
❖ Nutanix (NTNX) reported strong Q3 FY25 results on May 28, exceeding guidance across the board and signaling momentum into year-end. Revenue rose 22% YoY to $639.0 million, ahead of the $630-$640 million guidance range and the $631 million consensus. Annual recurring revenue grew 18% YoY to $2.14 billion, while free cash flow more than doubled YoY to $203.4 million.
Non-GAAP operating income came in at $137.1 million (21.5% margin), up 14.0% from a year ago, and materially ahead of expectations. GAAP EPS was $0.22 versus a $0.06 loss in the prior year quarter. Management emphasized enterprise demand for Nutanix Cloud Platform and continued innovation in generative AI and external storage integrations.
Looking ahead, Nutanix guided Q4 FY25 revenue to $635-645 million, implying flat sequential growth at the midpoint and just under 14% YoY growth. Operating margin is expected at 15.5-16.5%, down from Q3’s 21.5%, suggesting some planned expense ramp. For the full year, Nutanix sees revenue of $2.52-2.53 billion (above the $2.51 billion consensus) and FCF of $700-730 million.
While the Q4 outlook reflects cautious pacing, the full-year increase underscores confidence in durable profitability and expanding customer adoption. Despite a negative market reaction to softer-than-expected Q4 guidance, analysts maintained a bullish stance. Susquehanna and Piper Sandler analysts reiterated “Buy” ratings and raised their price targets, citing confidence in Nutanix’s long-term margin expansion and recurring revenue growth.
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Portfolio Updates
❖ We are happy to announce the addition of Arlo Technologies (ARLO) – which was recommended in one of our previous Newsletters – to the Smart Growth Portfolio.
Arlo Technologies is a smart security platform combining connected devices, proprietary AI, and cloud-based software to deliver high-margin, recurring services. Its shift to a SaaS-first model has redefined the business, with subscriptions now contributing the majority of revenue and driving scalable growth.
At the core is Arlo Intelligence – a vertically integrated AI engine powering features like facial recognition, object detection, and real-time emergency alerts. Unlike broader smart home players, Arlo maintains a singular focus on security, with privacy-first architecture and a full-stack platform that suppresses false alerts and delivers actionable intelligence. With over 5 million paid subscribers and ARR up 22% year-over-year, Arlo’s services now account for almost 60% of revenue and deliver gross margins above 80%. Deep integration with Google, Amazon, and Samsung ecosystems, along with expanded global retail access, further amplifies platform stickiness.
The company’s total addressable market exceeds $25 billion in the U.S. alone and is expected to grow to $93 billion globally by 2032 – with paid security adoption still underpenetrated. Arlo is positioned to take meaningful share as the smart home transitions from device-led to subscription-driven value.
Recent results underscore the company’s transformation. Q1 2025 delivered beats on both revenue and EPS, while free cash flow hit a record $28.1 million. EPS surged 67% YoY, and service revenue jumped 21%. Full-year 2025 guidance calls for $510-540 million in revenue and $0.56-0.66 in non-GAAP EPS, representing a sharp 70-100% increase over FY 2024. With strong customer retention and best-in-class unit economics (LTV-to-CAC of 4:1), Arlo now comfortably exceeds the Rule of 40 – a hallmark of high-quality SaaS growth.
Despite a 60% rally from April lows, ARLO trades below peers on forward EV/Sales and appears ~30% undervalued on projected cash flow. Wall Street sees 47%+ upside, reinforcing its GARP profile. For investors seeking exposure to consumer-facing AI, recurring revenue, and digital infrastructure in the home, Arlo offers a differentiated, under-the-radar growth story with room for both earnings expansion and multiple rerating.
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❖ We are happy to announce the addition of Itron, Inc. (ITRI) – which was recommended in one of our previous Newsletters – to the Smart Growth Portfolio.
Itron is a utility intelligence leader enabling grid automation, cost efficiency, and real-time resource management across electricity, gas, and water networks. Its integrated platform combines smart meters, edge computing, and AI-powered analytics to help utilities modernize infrastructure without expanding budgets.
Itron’s tech stack is purpose-built for digital infrastructure – replacing capex-heavy upgrades with scalable, data-driven solutions. Its Outcomes segment (software, AI, and services) is the fastest-growing and highest-margin driver, generating the bulk of gross profit and enabling recurring revenue expansion. Networked Solutions (68% of revenue) provides the backbone for smart metering and grid connectivity, while Device Solutions has been strategically deprioritized to keep the business asset-light and high-margin.
Itron holds over 60% share in North America’s smart metering market as well as a leadership position in smart electricity metering market, where it holds a 34% share of the installed base. This position of strength is underpinned by ITRI’s relative insulation from trade and geopolitical risks.
The company is structurally aligned with the fastest-growing segments of the smart grid and Industrial IoT markets, where demand for efficiency, automation, and real-time intelligence continues to accelerate. Its evolving business mix provides a strong foundation for margin expansion and sustained, predictable growth. AI-linked platforms now generate up to 80% of gross margins, and strategic partnerships with Nvidia, Microsoft, and Cisco are accelerating innovation across predictive analytics and grid intelligence.
Itron ended 2024 with record revenue, strong EBITDA growth, and more than doubled free cash flow. Its record backlog and growing software mix offer forward visibility and margin resilience even amid component cost pressures. 2025 guidance implies stable underlying revenue, supporting a compounding financial model.
Despite outperforming the S&P and Nasdaq year-to-date, ITRI trades at a steep discount to tech and industrial peers. With 16-22% upside based on analyst targets, Itron offers a rare combination of recurring revenue scale, sector leadership, and valuation disconnect – positioning it as a cornerstone for long-cycle, AI-native infrastructure growth.
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This Week’s Top Growth Pick: Wix (WIX)
Wix.com Ltd. is a global software company enabling individuals and businesses to build, manage, and grow their digital presence. Long recognized for its drag-and-drop website builder, Wix has evolved into a broader creation and commerce platform tailored to self-creators, agencies, and enterprises alike. Its growing suite of tools now spans payments, marketing, SEO, and AI-driven design, reflecting a deepening focus on user empowerment and product-led growth. With the recent launch of Wixel – its standalone AI design platform – and continued traction in professional services via Wix Studio, the company is redefining what it means to create online. In a world where small businesses are digitizing rapidly, Wix’s vertically integrated ecosystem offers a compelling alternative to fragmented solutions – positioning it as a durable growth engine in the broader SaaS and web infrastructure space.
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Drag, Drop, Dominate
Founded in 2006 in Tel Aviv, Wix.com began as a website-building tool for individuals and small businesses. Its intuitive drag-and-drop interface helped democratize online creation at a time when web development still required a certain amount of technical skill. The company went public in 2013 on the Nasdaq, but it wasn’t until the following decade that Wix began its evolution into a multi-faceted software platform with ambitions far beyond websites.
The inflection point came between 2019 and 2021, when Wix began expanding into business management tools and digital commerce. During this time, it launched Wix Payments, integrated advanced SEO and analytics features, and scaled out its App Market. But it was the 2022 introduction of Wix Studio – a design environment tailored for agencies and professional developers – that marked a clear push into higher-end markets. This move allowed Wix to tap into larger contracts and support more complex client needs, driving both ARPU (average revenue per user) and customer retention.
The past five years have been particularly transformative. In 2023, Wix started weaving generative AI across its core platform – powering everything from automated site creation and copywriting to intelligent image editing and customer engagement tools. These features helped remove friction for new users and meaningfully improved conversion and onboarding rates. The AI momentum culminated in early 2025 with the release of Wixel, a standalone, AI-native design platform built from the ground up for non-coders. Wixel marks Wix’s first foray into creative software beyond traditional websites, putting it in a position to compete in adjacent categories like graphic design and visual storytelling.
Wix has not relied on large acquisitions to drive growth, but has instead strategically expanded its ecosystem through a series of targeted collaborations. Notably, its longstanding partnership with LegalZoom continues to provide bundled services for new businesses, while a growing relationship with Vistaprint helps small businesses integrate brand design with digital presence. Wix has also broadened its agency and B2B reach through its Partner Program, which supports freelancers and creative firms with custom tools, analytics, and revenue-sharing incentives. These integrations not only extend Wix’s distribution and visibility, but also embed the platform deeper into the workflows of professional creators and service providers – helping it win market share in the premium website and design services space.
While Wix primarily relies on organic growth and strategic partnerships, it occasionally makes targeted acquisitions to accelerate innovation. Just last week, the company announced the acquisition of Hour One, a generative AI media creation specialist. The move marks another milestone in Wix’s evolution into a leader in AI-powered digital experiences, expanding its access to advanced technologies that are poised to shape the future of web design and visual content creation.
From a simple site builder to a multi-product platform serving freelancers, small businesses, and creative professionals alike, Wix has spent the last half-decade reshaping its business model – and in doing so, its growth trajectory.
Source: Wix.com Investor Presentation, Q1 2025
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The Sticky Side of SaaS
Wix has grown into a full-stack SaaS platform for online creation, monetization, and business management – purpose-built for self-creators, designers, agencies, and small businesses. While it’s still best known for website building, the company today monetizes through two distinct, high-margin revenue streams: Creative Subscriptions and Business Solutions.
Creative Subscriptions make up about 71% of total revenue. This includes recurring fees for website plans, premium templates, custom domains, and access to Wix Studio – the company’s pro-grade design environment. These subscriptions are sold directly to individuals and agencies and are highly predictable, with most plans billed annually. As of Q1 2025, Creative Subscriptions generate over $1.37 billion in ARR (annualized recurring revenue), making Wix a true subscription-first software business.
Business Solutions, the second engine, now accounts for 29% of revenue and is growing faster. This segment includes payments (via Wix Payments and POS), shipping, multi-channel commerce, and financial services like invoicing and gift cards. It also includes transaction-based tools for appointments, bookings, and restaurants. Unlike static site builders, Wix monetizes ongoing customer success – i.e. the more a user earns, sells, or books through their site, the more Wix earns. Transaction revenue alone is up nearly 20% year-over-year.
Wix’s platform is deeply vertically integrated. The company builds its own design systems, commerce infrastructure, marketing tools, and even AI creation engines – reducing reliance on third parties and enabling rapid product rollout. This “all-in-one” model gives users fewer reasons to leave and keeps gross margins high.
Where competitors offer disconnected tools or force users into rigid templates, Wix provides flexibility and depth. Whether through its no-code drag-and-drop editor, programmatic Studio interface, or the newly launched Wixel platform for AI-powered visual design, Wix adapts to creator skill levels and project complexity alike.
That adaptability is part of its moat. While many DIY platforms lose relevance as users outgrow basic tools, Wix retains them by scaling up – offering advanced workflows, richer monetization features, and dedicated support for agencies and freelancers. It’s not just about launching a site – it’s about scaling a business, and Wix gets paid for both.
The company is playing in a sizable and expanding market. Its TAM (total addressable market) for online creation, website hosting, and small business-focused digital commerce is estimated at $70-80 billion globally, growing at 10-12% annually. The rise of AI-generated content, solo entrepreneurship, and platform consolidation is expected to accelerate this trend – giving Wix meaningful room to grow both its user base and average revenue per user.
Source: Wix.com Investor Presentation, Q1 2025
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No Code, All Margin
Wix kicked off 2025 with strong operational momentum, posting double-digit revenue and free cash flow growth in Q1. But the results were slightly mixed relative to Street expectations: while revenue and cash flow came in ahead of estimates, non-GAAP EPS of $1.55 fell below the consensus forecast of $1.63, reflecting ongoing investment in growth initiatives and some timing-related expense impacts. Prior to the latest period, Wix surpassed analyst EPS estimates in 11 consecutive quarters.
Total revenue reached $473.7 million, up 13% year-over-year, driven by strength across both core segments. Creative Subscriptions segment grew 11% YoY to $337.7 million, and now generates over $1.37 billion in ARR. Meanwhile, Business Solutions revenue rose 18% YoY to $136.0 million, fueled by growth in Wix Payments, POS, and transactional commerce tools. Notably, transaction revenue alone climbed 19%, underscoring Wix’s success in monetizing user activity over time.
Total bookings rose 12% to $511 million, signaling strong underlying demand and positioning the company well for acceleration in the second half of the year. Partners revenue – generated from agencies and freelancers using Wix Studio – climbed an impressive 24% YoY, reflecting deeper market penetration in the pro-creator space.
Despite the EPS miss, Wix delivered standout profitability where it counts: free cash flow hit $142.4 million, up 35% from Q1 2024, translating into a 30% margin. Gross margins remained strong, with non-GAAP figures at 84% for Creative Subscriptions and 31% for Business Solutions, supporting a company-wide non-GAAP gross margin of 69%.
On the balance sheet, Wix continues to carry negative shareholder equity, now at -$168.6 million – but this is largely cosmetic. The company holds over $1 billion in cash, marketable securities, and deposits, and is generating hundreds of millions in annual free cash flow. The equity deficit reflects historical losses and recent aggressive share buybacks, not a liquidity issue.
Looking forward, Wix reaffirmed full-year guidance of $1.97-2.00 billion in revenue and $590-610 million in free cash flow, representing 12-14% growth and a 30-31% FCF margin – well above the Rule of 40 threshold. Q2 guidance of $485-489 million in revenue implies continued double-digit growth and aligns closely with current analyst models.
Wix’s business model is now firmly rooted in recurring revenue and usage-based monetization, with both segments contributing meaningfully to margin expansion. The platform’s hybrid of subscription lock-in and scalable commerce activity gives it durability few consumer-facing SaaS players can match – even in the face of short-term earnings noise.
Source: Wix.com Investor Presentation, Q1 2025
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Wix Flips the Script
Wix’s stock reached an all-time high in late January, but since then – like many technology and growth names – it has come under pressure as investors grew concerned that tariffs and broader macro headwinds could impact the company’s growth trajectory. Despite this, the stock has outperformed most peers over the past year, even after taking an additional hit following last quarter’s EPS miss. Still, with solid business momentum and strong analyst support in place, the recent pullback looks more like a correction than a trend.
Meanwhile, the decline in Wix’s share price has created an attractive setup. The stock is now trading in line with the broader tech sector on both TTM and forward P/E metrics. Compared to direct SaaS and SMB platform peers, Wix appears even more compelling – with its TTM and forward P/E ratios, EV/Sales multiples, and forward EV/EBITDA all trending toward the lower end of the peer valuation range.
Beyond potential price appreciation, Wix continues to reward shareholders through an aggressive buyback program. The company is among the most active in the mid-cap SaaS space when it comes to repurchases – using its strong free cash flow to reduce share count and return capital, while continuing to reinvest meaningfully in product and infrastructure. Management has explicitly stated that these buybacks will not come at the expense of growth.
In Q1 2025 alone, Wix repurchased $200 million in shares, bringing its cumulative buybacks since August 2023 to $725 million – a major commitment for an ~$8.5 billion company with fewer than 61 million shares outstanding. In February 2025, the board authorized an additional $200 million in buyback capacity.
These buybacks are the main reason Wix still reports negative shareholder equity, despite being fundamentally strong. The equity deficit is accounting-based – the result of accumulated deficits and treasury stock – not a sign of distress. In Q1, Wix reported $142 million in free cash flow and over $1 billion in liquidity after buybacks. This capital return strategy complements its high-margin, cash-generative model. It’s also a signal: management believes the stock is undervalued relative to long-term cash flow potential. In a SaaS world where many peers still rely on equity dilution, Wix is quietly flipping the script – turning margin into buybacks without compromising growth.
There are strong reasons to believe its recent pullback is severely overdone. Analysts have maintained their Buy ratings, with an average price target implying about 50% upside over the next 12 months. Multiple Wall Street firms have cited accelerating revenue momentum and strong long-term growth drivers – with some calling out Wix’s surging buybacks as a key near-term catalyst.
All in all, Wix’s strong execution, growing forward bookings, deepening product stack, and shareholder-friendly capital strategy position the stock well for a swift recovery – and a continued climb thereafter.
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To Sum It All Up
Wix is a vertically integrated SaaS platform enabling individuals, freelancers, and businesses to build and scale their online presence. Wix has long since moved beyond its drag-and-drop roots, and the company now operates across subscriptions, commerce, and AI-powered design – with a recurring revenue base and expanding monetization layers. Its deep product stack, strong brand loyalty, and strategic positioning across self-serve and professional segments underpin its durable growth profile. Recent advances in AI, rising traction in pro-creator channels, and a disciplined capital return strategy add further leverage. For investors seeking exposure to profitable growth in consumer-facing software, Wix offers a high-margin, product-led platform with meaningful upside as digital creation and SMB digitization accelerate globally.
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Smart Growth Portfolio
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Click here for more stock analysis from TipRanks Macro & Markets research analyst Yulia Vaiman
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Disclaimer
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