Why I’m bullish on Wix stocks after the last earnings report

August 11, website builder and online business platform Wix (((NASDAQ: WIX). We have released the results for the second quarter. The numbers look solid, revenue grew 34% year-on-year, and major new partnerships were signed every quarter.

However, due to the uncertainty surrounding the COVID-19 Delta variant, management has slightly lowered its forecast for the full year. The market didn’t like the news and drove the stock price down 25% the week after the report.

At the time of this writing, the market share is still down over 15%. This sale could be an opportunity for anyone looking to start a long-term position on Wix. This is why stock prices are bullish after the last quarterly close.

Image source: Getty Images.

Steady growth

Second quarter revenue was $ 316.4 million, up 34% from a year earlier. With the total amount collected by Wix (which cannot be counted all at once as income), collection increased 29% year-on-year to $ 342.9 million in the quarter. Much of this growth is driven by the business solutions segment, which includes the company’s e-commerce services. Shopify..

Business Solutions revenue for the quarter was $ 80.5 million, up 75% year-over-year, and now accounts for the majority of quarterly activity. Management said e-commerce accounted for 35% of total collection in the second quarter, up from 33% in the previous quarter.

Currently, Wix is ​​expanding its segment, resulting in a low gross margin of 22% for business solutions. Since the services are similar, margins can increase over time, approaching what Shopify reports (55% last quarter).

Wix’s business is so reliable that you can predict how much money your current customers will make, assuming the same churn rate. At the end of the second quarter, management estimates it will raise $ 15 billion from current customers over the next decade. If Wix continues to grow its customer base, that number is expected to grow over the next several years, creating a significant and predictable revenue stream for the business.

Vistaprint and App Builder

In the second quarter, Wix made a number of announcements regarding partnerships and new product lines. First, as part of the revenue release, management announced a new partnership with Vistaprint, an online platform that helps small businesses create promotional items like logos, business cards, and flyers.

Vistaprint customers will also have exclusive use of Wix to strengthen their online presence and access their company’s e-commerce tools. The integration will roll out in 2022, and Wix management plans to add hundreds of thousands of subscriptions over the next five years.

The company also made a major product announcement this quarter with the launch of the Branded App by Wix, a $ 200 / month no-code app builder. The high price of this service means that it is not suitable for all subscribers to the Wix platform, but this feature is intended for small businesses that cannot afford to pay full-time mobile developers. It sounds like great added value.

App Builder requires no coding, automatically migrates functionality from existing Wix websites, and automatically provides updates to maintain compatibility with iOS and Android. Wix-branded apps may not be a great source of short-term revenue, but they show that the company continues to invest in new products to serve its customers.

The rating seems reasonable

After the share price fell, Wix is ​​currently trading at a market cap of just under $ 12 billion. In addition, due to the rapid growth of the business of the company, the valuation seems much more rational than at other times in the past year. The company leads annual revenue of $ 1.25 billion in the lower end of that range. If this goal can be achieved, the stock will trade at the futures price (P / S) ratio of 9.5.

Given that the company has a high gross margin of 62%, which is expected to improve as the scale of its business solutions increases, and its credible customer base is expected to bring in $ 15 billion in fundraising over the course of of the next decade. The $ 12 billion market cap should look like a bargain. In just 3 to 5 years. If you think Wix may continue to grow at a rapid rate over the next several years Now is the time to start the position With the website builder.

This article represents the opinion of a writer who may disagree with the “official” recommended position of The Motley Fool Premium Advisory Services. We are diverse! Asking for investment treaties (even ours) helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer. Useful.

About Dora Kohler

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