What Happened?
A number of stocks jumped in the afternoon session after investors looked past recent fears of AI-driven disruption, focusing instead on strong company fundamentals and attractive valuations.
The tech sector recently experienced a downturn after the release of a new AI tool sparked concerns about potential industry disruption. However, strong fourth-quarter earnings reports have helped to ease those worries, with some analysts now viewing the fears as overblown.
According to analysts, "The disconnect between near-term fundamentals and long-term fear is enormous." This shift in sentiment is bolstered by the fact that the recent sell-off has made valuations in the software space more attractive for investors, especially for companies still showing double-digit growth. Some hedge funds that previously shorted software stocks began to cover their positions, interpreting the peak negativity as a sign of capitulation and a potential turning point for the sector.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
- E-commerce Software company Wix (NASDAQ: WIX) jumped 9.7%. Is now the time to buy Wix? Access our full analysis report here, it’s free.
- Sales Software company HubSpot (NYSE: HUBS) jumped 6%. Is now the time to buy HubSpot? Access our full analysis report here, it’s free.
- Video Conferencing company 8x8 (NASDAQ: EGHT) jumped 5.6%. Is now the time to buy 8x8? Access our full analysis report here, it’s free.
- Marketing Software company Braze (NASDAQ: BRZE) jumped 8%. Is now the time to buy Braze? Access our full analysis report here, it’s free.
Zooming In On Wix (WIX)
Wix’s shares are very volatile and have had 28 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 1 day ago when the stock gained 11.9% on the news that the company reported fourth-quarter 2025 results that saw its profit significantly beat Wall Street's expectations. The company posted an adjusted earnings per share of $1.81, which was 23% ahead of analyst estimates of $1.47. Revenue for the quarter grew 13.9% year-over-year to $524.3 million, meeting expectations. Billings, an indicator of future revenue, also showed strength, growing 16.1% to $539.3 million and narrowly topping forecasts. Furthermore, Wix's adjusted operating income came in well ahead of consensus estimates. The strong bottom-line performance appeared to overshadow concerns about a decline in its GAAP operating margin, giving investors a reason to cheer.
Wix is down 8.2% since the beginning of the year, and at $92.69 per share, it is trading 53.1% below its 52-week high of $197.53 from March 2025. Investors who bought $1,000 worth of Wix’s shares 5 years ago would now be looking at an investment worth $300.22.
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