Wix.com (WIX) is an Israeli developer and marketer of a cloud-based platform that helps people create websites and web applications. Shares of Wix have dropped about 38% in the past three months of trading.
The drop was due to short-term headwinds triggered by the pandemic and not because of problems in the fundamentals of the company. So, I believe shares have the potential to rebound strongly once all the negative effects from the COVID-19 crisis will have run out of the spectrum. Thus, I am bullish on this stock. (See Analysts’ Top Stocks on TipRanks).
Currently, Wix holds a portfolio of nearly 170 million registered users, of which 4.5 million have acquired a premium subscription. Wix’s customers are from the U.S. and overseas.
Most Recent Quarter
Total revenue came in at $316.4 million in the second quarter of 2021. It grew 35% year-over-year, beating projections by about $4.8 million. This was possible thanks to strong user growth, renewals, and conversion rates.
Total collections went up 29% year-over-year, reaching $342.9 million, with 82% of collections in creative subscriptions and the remaining 18% in business solutions provided during the quarter.
The company closed the quarter recording, on an adjusted basis, a net loss of $0.28 per share. However, this beat the consensus by $0.13. The net loss worsened compared to the corresponding period of 2020 as a result of continued headwinds of uncertainty due to the pandemic.
Short-Term Headwinds, Post-Pandemic Era Perspectives
On one hand, the COVID-19 pandemic slowed down subscriptions, as spending was more thrifty than usual during the crisis. On the other hand, the pandemic has most likely started a new era in which most businesses must have an online presence. To do this, companies need a website to describe and market their various products and services.
So, there is strong upside potential in subscriptions waiting to be recognized in the post-pandemic world. This would likely boost profit margins, and in turn, probably the share price as well.
An upsurge in Wix’s subscriptions could come as a result of the strategic agreement inked with buy now, pay later provider Klarna on October 21. Wix merchants all over the world are now able to offer their customers the possibility to pay in interest-free installments over time. Also, Wix merchants will be receiving the total payments upfront.
Looking Ahead to the End of 2021
For the full-year 2021, total revenues are expected to be between $1.26 billion and $1.27 billion, while the analyst consensus is $1.27 billion. Regarding total collections, these should fluctuate in the $1.4 billion to $1.44 billion range.
Wall Street’s Take
Turning to Wall Street, WIX has a Moderate Buy consensus rating, based on 12 Buys and six Holds assigned in the past three months.
The average Wix price target is $258.93, implying 39.3% upside potential.
Final Take
Short-term factors have held back shares. The company has the qualities for a vigorous recovery. (See Wix.com website traffic)
Disclosure: At the time of publication, Alberto Abaterusso did not have a position in any of the securities mentioned in this article.
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