WIX - Wix.com: Margin Growth And AI Point To Potential
2023-06-21 04:39:39 ET
Summary
- Several recent developments have led to financial improvements at WIX.
- Wix management has a background in advanced computing, including AI, and is focusing on cost reduction and new marketing strategies.
- We believe that these initiatives will create market share & additional ARPU.
Wix.com Ltd. ( WIX ) is an Israeli software company that offers a user friendly website building tool through Wix Editor and an advanced tool through Editor X in 22 languages and over 190 countries. As of March 2023, the company has 248 million users* worldwide and as of December 2022, the company had slightly over 6 million paying users. Wix offers its software through a freemium model that allows access to the basic product and users can upgrade to a paying product for additional features and services. Wix is regularly rated as the number 1 or best website builder by the media. (NYT: Wix is once again our top pick ) ( Forbes ).
Several recent developments have led to financial improvements at WIX. Due to new marketing strategies and cost cutting initiatives the company has quickly improved profitability over the last 2 quarters. Wix has shifted focus to the higher end customer through their partnership program which includes agencies, independent design professionals, and other third parties. On the Q1 conference call, CEO Abrahami commented: “Scaling our business with Partners [is] a key strategic focus. Partners revenue growth accelerated this quarter, up 27% year-over-year.”
Another notable development for Wix revolves around AI (artificial intelligence) integration. Wix management has a background in advanced computing including AI and the company has deployed earlier versions of AI such as ADI since 2016. Currently, Wix has 200 AI and Gen AI models deployed on their platform for Users and the company. Abrahami: “Furthermore, we have integrated AI into our internal workflows, significantly improving our … efficiency. Given our many years of domain expertise ….. we are at a significant industry advantage.”
Our buy and price target of $90 is based on the repositioning of the company’s product into the more lucrative higher end market, financial improvements, and promising developments in AI. We believe that these initiatives will create market share & additional ARPU gains. We caution investors on the high volatility. The shares gained 300% and then declined 80% from 2020 to 2022.
| Stats $ |
| Shares Out |
| 56.4 mm |
| Equity Market Cap |
| 4,405 mm |
| Total Debt |
| 930 mm |
| Cash & Marketable Sec |
| 1,301 mm |
| 2023 Revenues Est. |
| 1,533 mm |
| 2023 Cash Flow Est. |
| 221 mm |
| Current EV. |
| 4,034 mm |
| 2023 EBITDA Est. |
| 309 mm |
| EV/EBITDA (2023 Est.) |
| 13.1 X |
| 2023 GAAP EPS Est. |
| 1.04 |
| 2023 NON-GAAP EPS Est |
| 3.89 |
| 2024 NON-GAAP EPS Est |
| 5.10 |
| 2025 NON-GAAP EPS Est |
| 6.38 |
| Total Users |
| 248 mm |
| Premium Users |
| 6 mm |
| ARPU 1 st Q 2023 Est. |
| 20.77 / Month |
| BROXTON CAPITAL ADVISORS WIX as of 3/31/2023 |
| Saturday, May 20, 2023 |
| share price |
| $78.09 |
| PROJECTIONS IN MMs |
| 2023 |
| 2024 |
| 2025 |
| Income Statement |
| Revenue |
| $1,533 |
| $1,687 |
| $1,855 |
| Gross Profit |
| 1,004 |
| 1,105 |
| 1,215 |
| Operating Income |
| 76 |
| 176 |
| 287 |
| Pre-Tax Income |
| 76 |
| 176 |
| 287 |
| Net Income |
| 58 |
| 136 |
| 221 |
| EPS |
| $1.04 |
| $2.41 |
| $3.92 |
| Non-GAAP EPS |
| $3.89 |
| $5.10 |
| $6.38 |
| Revenue growth |
| 10.50% |
| 10% |
| 10% |
| EBITDA |
| $309 |
| $397 |
| $490 |
| Interest Expense |
| 0 |
| 0 |
| 0 |
| Capitalized Expense |
| 70 |
| 70 |
| 70 |
| Cash Flow |
| 221 |
| 286 |
| 354 |
| Equity Dividends |
| NA |
| NA |
| NA |
| Cash Flow Dividend Coverage |
| NA |
| NA |
| NA |
| Retained Cash Flow |
| 160 |
| 225 |
| 294 |
| Retained Cash Flow Sum |
| 160 |
| 386 |
| 679 |
| Valuations |
| Cash Flow Yield Vs. Equity |
| 5.0% |
| 6.5% |
| 8.0% |
| EV/EBITDA |
| 13.1 |
| 10.2 |
| 8.2 |
| P.E Ratio |
| 75.4 |
| 32.4 |
| 19.9 |
| Enterprise Value |
| 4,034 |
| Net Total Debt |
| -371 |
| Equity Market Cap |
| 4,405 |
| 4,405 |
| 4,405 |
| Debt Ratios |
| EBITDA/Interest Coverage ratio |
| NA |
| NA |
| NA |
| Net Debt/EBITDA |
| NA |
| NA |
| NA |
| Liquidity |
| Mar. 31 2022 |
| Cash & Marketable Sec |
| 1,301 |
| Borrowing Availability est. |
| 100 + |
| Total Current Assets |
| 1,261 |
| Total Current Liabilities |
| 1,211 |
| Current Ratio |
| 104% |
| Debt |
| Borrowings (converts) |
| $930 |
| Borrowings Net |
| -$371 |
*: “Users,” or “registered users” means all individuals or entities that have registered with Wix, as identified by a unique email address provided by such individual or entity. The convertible bonds are 0% coupon.
For further details see:
Wix.com: Margin Growth And AI Point To Potential