RBC Capital has upgraded Wix.com due to its high free cash flow and pricing power.

In premarket trading on Thursday, shares of Wix.com (NASDAQ:WIX) increased more than 1% as RBC Capital Markets upgraded the website development company, noting its pricing power and solid free cash flow position.

In a note to clients, analyst Brad Erickson stated, "We see WIX as a solid defensive play benefitting from structurally higher new business formation vs. pre-COVID, in the middle of exerting its pricing power for its very sticky subscription business, and on a path towards significant & underappreciated [free cash flow] growth over the next several years."

Wix.com (WIX) shares now have an outperform rating from sector perform, and Erickson increased his per-share price objective from $80 to $100.

Additionally, Wix.com (WIX) has experienced challenges after it stopped benefiting from COVID-19 in the middle of 2021, including lower-quality subscription turnover and "structurally greater" new business formation than it did before COVID, according to Erickson. However, according to Erickson, "all of this is commonly known and understood" and should not come as a surprise to investors. It has also battled with challenges to its subscriber base, the weakening economy, and the impact of Apple's (AAPL) Identifier for Advertisers.

Wix.com (WIX) may boost pricing every three to four years in the short and medium term, and the headwind of new business formation is probably here to stay, which should work to the company's advantage.

In example, Erickson said, "We like WIX's differentiated focus on product development for [e-commerce] solutions, where we think the opportunity to expand and win share both in agency channels as well as from Wordpress, remains strong."

The company might also profit if it achieves the longer-term growth goals it set forth at the analyst day of the previous year, as well as if foreign exchange headwinds are moderated and it has become more shareholder-friendly, as evidenced by the presence of activist investor Starboard and a share buyback programme, among other factors.

In addition, Erickson mentioned that because both Wix.com (WIX) and rival GoDaddy (GDDY) have activist investor Starboard as a shareholder, both businesses may be candidates for mergers and acquisitions.

Wix.com (WIX) said earlier this month that the Israeli court has approved its repurchase programme for a further six months, through July 4, 2023.

On Wix.com, analysts are generally circumspect (WIX). The Wall Street experts rank it as a BUY, while the authors of Seeking Alpha give it a HOLD rating. WIX is rated a HOLD by Seeking Alpha's quant algorithm, which routinely outperforms the market.