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Shopify vs. Wix.com: Which E-commerce Platform Is Poised for Growth?
Stock Analysis & Ideas

Shopify vs. Wix.com: Which E-commerce Platform Is Poised for Growth?

The COVID-19 pandemic has accelerated the move of many brick-and-mortar businesses online. This is because as pandemic restrictions kept stores closed or open with restricted footfalls, online sales saw a boom when many shoppers started shopping online.

This has also given rise to a need for e-commerce infrastructure providers that can help businesses build their online presence quickly and efficiently. That’s where e-commerce platforms like Shopify and Wix.com come in.

 The popularity of these e-commerce platforms is also indicated by the website traffic data tool available on TipRanks. This tool can also be a precursor of a company’s upcoming earnings, indicating the popularity of its services and solutions.

We will use the TipRanks stock comparison tool to compare two such e-commerce platforms, Shopify and Wix.com, look at the website data traffic for both and see what Wall Street analysts are saying about these stocks.

Shopify (NYSE: SHOP)

Shares of Shopify have seen a pullback recently, as the stock has tanked by around 14% in the past month and by 6.1% in the past year. Shopify is a provider of essential Internet infrastructure for e-commerce that offers services through subscription and merchant solutions.

Will investors continue to be invested in the stock and is the stock currently overvalued? Let us try and answer this question.

William Blair analyst Matthew Pfau thinks that the current pullback in the stock has brought SHOP’s valuation to a “more reasonable level.”

Moreover, the analyst thinks that over the long-term, the company’s premium valuation is justified, given its “growth prospects, great execution, and dominance in the e-commerce software space.”

Let us look at some of these growth levers for Shopify in more detail. Shopify is also one of the best growth stocks on TipRanks. Growth stocks are defined as companies that are expected to grow at a much higher rate than the market average.  

According to Pfau, in a bull case scenario, the company could very well see its revenues rising by 30% or more over the next several years. This is because the analyst believes that Shopify has lots of room to add more small-to-medium businesses as customers in North America, as it currently accounts for only 9% of the e-commerce market in North America.

What’s more, according to Pfau, “Shopify continues to provide the best e-commerce platform to SMBs, in our view, and the company has shown good progress with its Plus solution.”

Shopify’s Plus e-commerce solution lets larger merchants scale up easily, provides support, and offers additional functionality to its platform.

When it comes to Q4, Pfau noted that currently, consensus Street estimates peg Shopify’s Gross Merchandise Value (GMV) to grow 28% year-over-year and for revenues to increase 37%.

Indeed, the company had stated in its Q3 press release that it expected revenues to increase rapidly in 2021 but at a lower rate than in 2020.

Analyst Pfau cited holiday sales data that “bodes well for Shopify’s ability to meet or beat these estimates.”

As a result, last week, the analyst upgraded the stock from a Hold to a Buy. Pfau added that given the 30% revenue growth in the bull case scenario, “coupled with maintaining a premium valuation, should drive shares to outperform the overall market and SaaS [software-as-a-service] space.”

The rest of the analysts on the Street, however, are cautiously optimistic about Shopify, with a Moderate Buy consensus rating based on 13 Buys and 8 Holds. The average Shopify stock prediction of $1,623.86 implies upside potential of approximately 47.2% to current levels for this stock.

Pfau’s bullish outlook on the stock is also supported by the Website traffic data tool available on TipRanks. This tool indicates that in the month of December alone, Shopify’s unique visitors across all its domains jumped 53.6% year-over-year to 48.6 million. In calendar Q4, Shopify’s unique visitors across all its domains have increased year-over-year by 38.5% to 134.4 million.

Wix.com (NASDAQ: WIX)

Shares of Wix.com, a cloud-based website development platform, have also dropped 4.4% in the past month and by a whopping 44.8% in the past year. This is even as the company delivered strong Q3 results that prompted Wix to raise its outlook for FY21.

In FY21, Wix.com has projected year-over-year revenue growth between 28% to 29%, with revenues ranging between $1.26 billion and $1.27 billion.

But will WIX be able to achieve this target? RBC Capital analyst Brad Erickson is cautious as the analyst’s channel checks with creative, marketing, and ad agencies have indicated that while the formation of new businesses is higher than before the pandemic, it is still not at the levels seen during the COVID-19 pandemic. Businesses use WIX to create websites, so fewer businesses means fewer clients for Wix.

The analyst is of the view that Wix could be facing a difficult comparison to last year in the first half of this year as Erickson awaits the “magnitude of deceleration to the core subscription business ex-Vistaprint.”

Last year, the company announced a partnership with Vistaprint where customers using Vistaprint for building brand and marketing strategies will also be able to use the Wix platform.

The company pegs revenues earned from such B2B (business-to-business) partnerships under Collections and defines collections as those transactions that “include cash receipts for premium subscriptions purchased by registered users as well as cash we collect for payments and additional products and services, as well as payments due to us under the terms of contractual agreements for which we may have not yet received payment.”

Erickson estimates that, barring another Vistaprint-type deal, Collections could be approximately 4% below Street estimates for 2022 and around 6% in Q1.

Even when it comes to WIX’s Q3 results, excluding the $70 million of B2B collections in Q3, Erickson states that this could imply that year-over-year, Collections might have been slightly down or flat. He sees that as a sign that the DIY web design market no longer has huge growth potential.

The analyst is of the view that the company’s payments and e-commerce “narrative” could support the stock for long-term investors, but the analyst continues to “struggle with arguments around EV [enterprise value]/revenue-based valuation support.” He thinks lower growth rates will become the norm, replacing historically high levels of growth at Wix.

The analyst is sidelined on the stock with a Hold rating and a price target of $200 (44.9% upside) on the stock.

The rest of the analysts on the Street, however, are cautiously optimistic about Wix.com, with a Moderate Buy consensus rating based on 9 Buys and 4 Holds. The average Wix stock prediction of $228.62 implies upside potential of approximately 65.6% to current levels for this stock.

Erickson’s cautious stance on Wix.com is also supported by the website traffic for Wix.com. The website traffic data available on TipRanks indicates that in the fourth quarter of last year, unique visitors to Wix.com slowed down, with a drop of 6.4% year-over-year to 55.8 million.

Bottom Line

While analysts are cautiously optimistic about both stocks, based on the upside potential over the next 12 months, Wix.com seems to be a better Buy.

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