Shares of Israeli-based web development platform provider Wix.Com (WIX), are under some pretty considerable selling pressure after nearly getting cut in half from peak to trough this year.
The SaaS (Software-as-a-Service) company enjoyed pandemic tailwinds, and like so many other lockdown beneficiaries, Wix has been plunging back amid broader economic reopenings. Despite being based out of Israel, the company derives most of its revenues (just shy of 60%) from the North American market. After a few quarterly misses and a guidance downgrade, it’s not a mystery as to why Wix has fallen into such a violent tailspin.
Although reopening headwinds could still persist, there are many great growth levers that the company can pull to offset recent headwinds and get its stock back in the right direction. For that reason, I am bullish on Wix stock. (See Analysts’ Top Stocks on TipRanks)
Intriguing Long-Term Growth Prospects Worth Getting Excited About
Most notably, the firm’s payments business could give a lift to the stock, as e-commerce grows to account for a larger slice of the overall Wix pie. Wix CEO Avishai Abrahami remarked on the encouraging trend in the company’s last earnings call with shareholders.
While Wix has some very tough rivals in e-commerce, most notably Canada’s Shopify (SHOP), investors should not discount the company’s ability to grab a larger slice of the massive small and medium-sized business (SMB) corner of the e-commerce market.
Indeed, the freemium business model could work in Wix’s favor, as it showcases its new innovations to freemium subscribers in an effort to convert them to become paid subscribers.
The company’s solid acquisition track record should help it add new features. With a strong balance sheet, the firm has the means to take advantage of opportunities in the e-commerce space as they arise.
The Low-to-No Code Trend Is Still Very Much at Play
Wix’s website builder is getting more intuitive to use and feature-rich by the day. That alone leaves Wix on the right side of a very powerful long-term secular trend as desktop and mobile websites move closer towards a low-to-no code development world.
Indeed, coding is a vital skill to have. Still, it’s companies like Wix that are looking to put the power in the hands of everyday small and medium-sized businesses with tighter budgets who need a website built according to certain specifications.
The time and cost-savings potential are enormous, and for that reason, Wix is a magnificent tech company that’s well worth considering, even if the website-builder playing field grows more competitive.
Wall Street’s Take
Turning to Wall Street, WIX has a Strong Buy consensus rating, based on 10 Buys and three Holds assigned in the past three months.
The average Wix price target of $261.25 implies 36.4% upside potential. Analyst price targets range from a low of $210.00 per share to a high of $320.00 per share.
Wix Stock: The Bar Is Low; the Entry Point Is Attractive
The pandemic has gone from a tailwind to a headwind, with the company downgrading its guidance due to the Delta variant of COVID-19. Full-year revenue and free cash flow guidance for 2021 were both reduced considerably.
The lingering pandemic and its associated disruptions alongside a lack of lockdowns have not boded well for Wix. That said, I do believe most of the negatives are already baked into the stock, presenting a compelling entry point for long-term investors. Indeed, several hot trends are at play, including e-commerce and a potential low-to-no code revolution.
The Bottom Line on Wix Stock
Wix has a great platform in its hands, and it’s getting better with time. At just 9.5 times sales, oversold shares of Wix seem way too cheap. This is especially true when compared to the likes of e-commerce kingpins like Shopify, which currently trades at a painfully high 44.7 times sales.
Sure, Shopify may be in a league of its own, but so too is its valuation. For the value-conscious, Wix seems like a far more attractive bet, as it attempts to put in a bottom over the next year after a nearly 50% drop.
Disclosure: Joey Frenette doesn’t own shares of any mentioned companies at the time of publication.
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