Stock Forecast: Easy Site Construction and Increased Subscriptions Drives WIX Up

 

This article was written by Esther Hanon, a Financial Analyst at I Know First.

[Source: Wikimedia Commons, May 29th, 2018]

“Our continued focus on product development and efficient marketing investment once again drove strong financial results. This is a strong start to the year, and we are building momentum to propel continued growth through the remainder of 2018.”

–Avishai Abrahami, Co-founder and CEO of Wix.com

Stock Forecast: Easy Site Construction and Increased Subscriptions Drives WIX Up

Summary:

  • Strong Q1 Results
  • Wix.com increasing the full year outlook
  • The I Know First Algorithm is currently bullish on WIX

Thus far, WIX jumped nearly 9% following their Q1 earnings announcement on Wednesday, May 9th, 2018. Wix.com had an amazing first quarter, which is a very strong start to the year. Wix.com outperformed the analysts’ forecasts in its first quarter financial statements published today, reporting more revenue and a smaller loss than expected. At the same time, the company raised its guidance for 2018 as a whole. Wix.com provides a platform for easy construction of websites for small and medium-sized businesses and private individuals. WIX hit a new record today, reflecting a market cap of over $4 billion. They, again, beat expectation for both collection and revenues, and are increasing the full year outlook. They reported free cash flow of more than $21 million. This was their highest ever and shows the increasing leverage of the Wix.com business model. These strong financial results are driven by their continuous focus on innovation, product development and outstanding market execution.

[Source: Yahoo Finance, May 29th, 2018]

They’ve also seen impressive conversion and retention in their cohorts. They’ve added 231,000 subscriptions this quarter, the most ever in their history. When you look at the Q1 2018 user’s cohort, it is the largest number of subscriptions ever in the first quarter. Wix.com monetized this cohort over a very long period of time without the need for additional marketing; and this cohort continues to grow in size. For every 100,000 in new subscriptions they had, they estimate future collection of more than $186 million. Wix.com believes that this new cohort will generate over $370 million in collection over the next eight years at 80% gross margins with very little additional marketing. It is the result of the value that Wix.com users get from their product and the benefits of the business model.

Strong Q1 Quarter Results:

Additionally, Q1 was a very strong quarter for product development for WIX. As they have expanded their new product offering, they continue to improve existing products. They rolled out Wix Answers, which is a product that they developed in-house to support the users. Other companies were asking if they could use the Wix.com support infrastructure, so they offered it to them, and the initial feedback was amazing so Wix.com now decided to make it available to everyone. This product is another example of how they have taken something that is very hard for businesses to do online, and created a product that is super easy and effective. It shows Wix.com’s strength in R&D as they created something for their own use, and now it can be offered to others.

Wix.com recorded $138 million in revenue in the first quarter, 49% more than in the first quarter of 2017 and 16.3% more than in the preceding quarter. Collection, which includes the change in deferred revenue, totaled $160 million, enabling the company to beat its guidance it provided last quarter for both revenue and collection. According to GAAP accounting rules, Wix.com’s operating loss was $18.5 million, 10% less than in the corresponding quarter last year, and its net loss was $19.8 million, a 5.1% decrease. Wix.com’s non-GAAP net first quarter loss, excluding accounting expenses pertaining to remuneration for employees, was $2.1 million, compared with a $8 million loss in the corresponding quarter last year and a $7.2 million profit in the preceding quarter. Net loss per share was $0.05, while the analysts predicted $0.10.

Wix.com generated $24.8 million in cash flow from current activity in the first quarter, and its free cash flow reached a record $21.4 million. The company had $266 million in cash at the end of the first quarter. Wix.com recently announced that it would petition a court for permission to spend $80 million on buying back its own shares, but CFO Lior Shemesh said that this was a purely procedural process in the event that the company decides to do this in the future and was not considering the measure right now.

What Wix.com is planning to do with its cash:

The company said, “Companies with a value similar to ours are usually traded with their cash ranging from 5% to 15% of their market cap. I think that $270-300 million is a suitable amount of money for the company’s current market cap. We’re not planning acquisitions at this stage, but this is the amount of money we want to have for a rainy day.” Commenting on the company’s first quarter financials, Wix.com said, “The first quarter performance was really good in both the numbers and business activity. We’re still making progress in the percentage of users switching from free to paying, which resulted in our outdoing our guidance for all measures.”

Highest recruitment turnover ever:

Wix.com added 5.9 million users in the first quarter, bringing the number of its users to 125 million, with the number of paying users rising 231,000 to 3.5 million. Wix.com is publishing a figure today – its “recruitment turnover” of users in the first quarter was the highest ever and is projected to generate over $370 million in collection in the next eight years. Shemesh adds that the Wix code and ADI products continue to contribute to the company’s results, with the addition of a new product: Wix Answers for managing online customer support. This product was originally developed for the company’s internal needs, but it was decided to also market it outside the company.

Analyst Recommendations:

According to analyst recommendations from Yahoo Finance, the current consensus is a “Buy” in WIX Stock, with 3 advising a “Strong Buy”, 8 advising a “Buy”, and 6 advising a “Hold”.

[Source: Yahoo Finance, May 29th, 2018]

I Know First Current Bullish Forecast for WIX:

The I Know First algorithm is currently bullish for WIX, as seen in the below forecast. The signal is 423.77 for the 1-year forecast with a predictability indicator of 0.73, a high value showing significance in the strength of the forecast. It means it has a long track record of accurate one-year forecasts for WIX’s stock.

Conclusive Thoughts:

Looking at the future, Wix is slightly raising it guidance for 2018 as a whole “in order to reflect confidence in the ability to continue reporting strong growth,” and now projects $594-597 in revenue for 2018, 40% more than in 2017, with $651-657 million in collection, 36% more than in 2017. The midpoint of Wix.com’s revenue guidance range is now $2.5 million higher, meaning that the higher guidance is attributable to the company’s exceeding its guidance for the first quarter. Wix is projecting $144-145 million in revenue in the second quarter, the same as the analysts’ forecasts, and $158-159 million in collection.

Ultimately, I am bullish on WIX stock as I believe that Wix.com is going to gain more and more subscribers as they further boost their profitability by introducing new technologies and offerings to their current and prospective subscribers. In their financial reporting, they demonstrated strong growth with their future guidance.

Past I Know First’s Algorithm Success With WIX:

I Know First has made accurate predictions on WIX in the past, such as its 1 year bullish article published on February 20th, 2018. In the article, we discussed WIX’s continuing the positive growth trend and the potential for future growth of sales. Since the article’s release and over the span of three month, WIX stock jumped 15.76% outperforming the market (S&P500) by nearly 16%, in good agreement with this bullish I Know First forecast for WIX. This stock’s market trend forecast has a signal score of 225.35, a score that is above 100 which shows the signal strength. I Know First also had a very high 1-year forecast predictability score of 0.6, which means it has a long track record of accurate one-year forecasts for WIX’s stock.

This bullish forecast for WIX was sent to I Know First subscribers on February 20th, 2018. 

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About Wix.com Ltd. (NASDAQ: WIX):

Wix.com Ltd. (NASDAQ: WIX), incorporated on October 5, 2006, is a Web development platform enabling businesses and organizations to take businesses, brands and workflow online. The Company provides solutions that business owners can use to operate various aspects of their business online, such as selling goods, taking reservations, and scheduling and confirming appointments. These applications provide Wix registered users a bespoke front-end for customers visiting their Website, as well as a back-end management dashboard. The Company has developed these software applications for businesses in specific verticals, including retail and online stores, service providers, hotel and property management, music and restaurants. These vertical applications are integrated into the Company’s Website templates or can be installed on any existing Website and set up by the user and without the need to write code. The Company offers its platform in various languages, including English, French, Spanish, Portuguese, Italian, Russian, German, Japanese, Korean, Polish, Dutch, Turkish, Hindi, Norwegian, Swedish, Danish and Czech.

I Know First Algorithm Heatmap Explanation:

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