Wix.Com: Hidden Value Game (NASDAQ:WIX)

Wix.com (NASDAQ:WIX) is a leading cloud-based web development platform with a strong focus on providing small businesses and individuals with an intuitive and easy-to-use platform to build professional websites. The company has a growing user base, with more than 238 million registered users and approximately 6 million premium subscribers. One of Wix’s critical strengths is its strong brand recognition and customer loyalty. The company has invested heavily in marketing and has developed a solid reputation for providing high-quality, easy-to-use web development tools. As a result, Wix has a large and loyal customer base that will likely continue to use the platform for the long term, as seen in the strong development of its quarterly cohorts. Another key strength of Wix is ​​the diversity of its sources of income. In addition to its core web development platform, the company also generates revenue from various other sources, including e-commerce, advertising, and premium services. This diversification of income streams helps reduce the company’s overall risk profile and provides a more stable foundation for long-term growth.

Overall, Wix represents an attractive investment opportunity for those looking to capitalize on the growing demand for web development tools and services. The company’s strong brand recognition, customer loyalty, and diverse revenue streams position it well to continue to grow and outperform the market over the long term, which is why I rate the stock a “Buy.”

ecommerce marketplace

ShopTech’s e-commerce and infrastructure marketplace has experienced significant growth in recent years as more and more consumers turn to online channels for their shopping needs. This trend has been driven by several factors, including the widespread adoption of mobile devices, the increasing availability of high-speed Internet, and the convenience and ease of shopping online.

Wix has played an important role in this market, providing small businesses and individuals with an easy-to-use platform to create and host professional websites. The company’s e-commerce capabilities have been particularly important, allowing users to set up online stores and sell their products and services directly to consumers.

Looking ahead, the e-commerce market will continue to grow rapidly. Various forecasts project growth of around 12% per year for at least the next three to four years as more and more consumers become accustomed to shopping online and new technologies emerge to facilitate this trend. Still, global online retail trade amounts to only 15-20%, which will be 50% and more towards the end of the decade. Wix, while it has seen declining growth in recent quarters, is well positioned to capitalize on this growth as it continues to develop and improve its platform and expand its offerings to meet the changing needs of its customers.

Increased monetization and profitability

Wix has made several efforts to improve its monetization in recent years to drive profitability and fuel long-term growth. A key focus for the company has been to increase average revenue per user (ARPU) through the sale of premium products and services. To this end, Wix has introduced a number of new premium offerings, such as advanced design and development tools, eCommerce capabilities, and marketing and advertising services. These offers are targeted at the company’s most active and engaged users, who are more likely to be willing to pay for additional features and functionality.

In addition to selling premium products and services, Wix has also sought to increase its monetization through advertising. The company has developed various advertising products and services that allow companies to target specific user segments and promote their products and services through the Wix platform. This has helped diversify the company’s revenue streams and provide a new source of income.

Finally, Wix has also focused on improving its operational efficiency to drive profitability. This has included optimizing the company’s sales and marketing efforts, implementing cost reduction measures, and streamlining its operations. These efforts have helped improve the company’s results and have laid the foundation for long-term profitability.

Overall, Wix’s efforts to improve monetization have fueled growth and pushed the company toward profitability. As the company continues to focus on these efforts, it will likely be well positioned to continue to grow and outperform the market over the long term.

Valuation

Based on my estimates, Wix’s fair valuation is $123.28, which is a 52.4% advantage over the current price. Wix has seen continued client growth in recent quarters, fueled by the sharp increase in demand for web development services. Therefore, as the company continues to add customers while slowly but steadily increasing its ARPU, Wix revenue should continue to grow at approximately ~10% per year for the next five years, fueled by an eCommerce business. accelerated and stronger demand once economic sentiment improves. Also, as the company has seen massive improvements in its monetization efforts (see chart above), I expect Wix to take advantage of operating leverage to move forward in terms of profitability, which I expect to materialize in 2023. As a result, I expect EBITDA to grow by almost a 27.4% per year over the next few years to ~$457 million by 2026. Wix has always been cheap relative to its peers. While the times of massive growth seem to be over for the company, Wix is ​​still great from the ground up and expects the margin expansion to make this stock a hidden value bet.

risks

There are some potential downside risks when investing in Wix. One risk is the company’s reliance on the continued growth of the e-commerce market. While the eCommerce market is likely to continue to grow, as described above, the recent economic turmoil and consequently declining consumer confidence have shown that the market can slow down and contract rapidly, which would affect Wix and its drive for profitability. negatively.

The web development platform market is very competitive, with many companies vying for market share. Wix, Shopify (SHOP), WooCommerce, Magento (ADBE), and GoDaddy (GDDY) are among the major players in this market. Each of these companies offers a range of products and services for construction and accommodation. The result is highly competitive market dynamics, which make growth more complex and can result in a full-blown price war. I consider the possibility of this scenario becoming a reality to be medium-low. However, it is still essential that potential investors follow through for years to come.

Finally, there is also the risk of technological change and disruption. The web development industry is constantly evolving and new technologies and platforms can emerge that make Wix products and services obsolete. If this were to happen, it could negatively affect the company’s financial performance and market position.

Overall, while Wix has a strong brand and a large and growing user base, there are some potential risks in investing in the company. It is critical that investors consider these risks carefully and thoroughly research the company before making any investment decisions.

Conclution

Wix has experienced strong growth in recent years. The company has made several efforts to improve its monetization, including the introduction of premium products and services and the expansion of its advertising offerings. These efforts have helped fuel growth and push the company toward profitability. As the eCommerce market continues to grow, with forecasts projecting growth of around 12% per year for the next several years, Wix is ​​well positioned to capitalize on this trend.

Despite these challenges, the company’s strong brand, customer loyalty, and diverse revenue streams make it a compelling investment opportunity and “buy,” according to my analysis. However, Wix faces competition from other web development platforms, and there is always the risk of technological changes and disruptions. It is vital that investors carefully consider these potential risks before making any investment decision.