Wix Stock Forecast: Bullish Forecast – Growing Revenue VS Negative Earnings. Will Wix Score a Three-pointer EPS in 2018?

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The article was written by Gleb Zinkovskii, a Financial Analyst at I Know First.

“Continued improvements to our product offering and successful execution of marketing campaigns drove robust financial results this quarter, closing out a strong year,”

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

Highlights:

  • 2017 financial results are released – 2017 revenue of $425.6 million, up 47% y/y and free cash flow of $70.7 million, up 95% y/y
  • Strategic business partnership expansion with Google Cloud
  • Wix Code official launch

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[Source: commons.wikipedia.org]

2017 Financial Results – Wix’s “Bull’s-eye” Hit On Earnings In Q4

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WIX stock performance over 2016-2017 [Source: Yahoo Finance]

Wix’s 2017 financial results were published on February 14th and so far many of analysts expressed their opinions on that. The “all-time records growth” statements does not draw that much positive investors’ attention anymore and Wix is not an exception. However, there are some benchmarks which the company scored. First, despite the fact that for three quarters of 2017 the company missed the estimated by analysts earnings by more than 10 cents sometimes, it managed to end up the year with “bull’s eye” hit of 16 cents of earnings estimated by analysts. Just to comparison purposes, the earnings for the first three quarters were either negative (Q1: -$0.18) or bouncing around zero (Q2: zero and Q3: $0.01). Therefore, one can consider this to be a good sign for the company as we see the management’s efforts to achieve the key performance metrics succeeded. At the same, time the company projects the revenues for 2018 to be from $591 – $595 million, which implies that we should see the growth of the key metrics revealing the nature of the positive dynamics throughout the upcoming year on quarterly basis. Second, we have seen that Wix’s growth in R&D expenses resulted in some $153 million in 2017 which is 45% growth comparing to 2016. That trend is highly ascending and we should reasonably expect to see continuous development of the currently existing and completely new products and services in the upcoming years. This should help the company to keep its customers heated-up for new ways to approach the design and creation process of their websites. As a result, with the increase in the sophistication of products we may expect to see higher rates of premium subscriptions conversions supporting the revenue growth in the coming years. Third, with the projected 39-41% positive growth of Free Cash Flow and combined with the first point Wix’s investors may reasonably expect increase in the value of Wix’s stocks will be growing in price as the company progresses towards its objectives throughout the 2018 leaving less opportunities to purchase them before they fly-up in price.

“To The Stars And Above!” – Strategic Business Partnership With Google Expanded

Wix has a long lasting track of business relationship with Google. So far, the collaboration was done through expansion of the breadth the services that utilized Google’s products like G Suite, Google Platform, Google Maps API, YouTube and AdWords. Nowadays it is the main trend in small-to-mid size business to utilize cloud based services to have an environment which integrates email, document management and storage functionality to address the daily business routine needs. In the era of massive migration of such businesses from offline to online models require from those setups two main things – communication and collaboration between all stakeholders. Having a global registered user base of over 120 million, Wix continued to offer Google products and services (G Suite, Google Cloud Platform, Google Maps API, YouTube and AdWords) to them and satisfy their current and emerging needs. The result is that the value of the Wix’s platform increases.

In addition to that on May 17th Wix announced launch of SEO Wiz Tool and Google Search Console Integration, which powers search optimization on Wix sites by creating a personalized plan to help users ensure that their websites are easily found online. Sarig Reichert, Head of Wix Search Products, said during press release of the product:”…The product integration with Google Search Console further advances the ability for our users to be found on the world’s most popular search engine.” In developing the product Wix and Google teams worked directly with each other and created a powerful and user-friendly solution for the customers to index their websites. The tip selling point is the single-click process from Wix account which enables users to submit the request for website indexing. Therefore, the convenience of such integration allowed users to directly connect to Google Search Console and get detailed information about how their site is doing in Google Search. As a result, this factor could be considered as one of the key behind the number of premium user conversions and expansion of the users’ base in 2017.

Wix Code Official Launch – New Competitive Advantage Through The Prism Of “User-friendly” Coding

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[Image source: www.lnk.co.il]

On July 25th, 2017 Wix announced the launch of a new solution that allows users to code new web applications. Namely, the solution is an integrated environment for design of web-based applications where the whole creation process was made as easy for user as possible. Avishai Abrahami, Wix.com Co-founder and CEO, said: “Wix Code works for the creation of standalone web applications as well as to further enhance existing website functionality. The features benefit users at all levels and decrease the amount of time it takes to create something amazing… With Wix Code we have combined the front-end aesthetic of Wix, the powerful back-end of Wix OS and added an easily deployable infrastructure that allows anyone to create web applications with no limits on resilience, style, features or functionality.” In financial terms it means for the Wix’s customers that their costs for creation of more advanced and tailor-made websites drop significantly due to high degree of processes mutual integration of Front-End and Back-end capabilities and one-stop-shop approach to website design and creation. Therefore, this breakthrough technological shift may also able to drive new type demand for website environments and set up new standard for Wix’s competitors.

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Overview comparison chart of the current Wix and WordPress products [Source: superbwebsitebuilders.com]

Analyst coverage

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A number of analysts, polled by Yahoo Finance, shared their views on Wix’s current momentum. Of 17 analysts surveyed, (including Barclays, Deutsche Bank and J.P. Morgan) 3 advise “Strong Buy,” 8 advise “Buy” whilst 6 advise investors to “Hold” position. A strong buy recommendation indicates that the shares are currently perceived as undervalued.

 

[Source: Yahoo Finance]

 My Bullish Forecast For Wix in 2018

Nowadays, the business is turning to Internet on a worldwide scale as it becomes practically impossible to maintain competitive advantage otherwise. The company has potential to experience continued growth as global website environment provider for small-to-mid businesses, supported by its strong strategic alliance with the world leader of Internet search – Google. This partnership will also contribute to bringing in large revenue streams going forward. My vision of the future Wix stock performance resonates with the current I Know First algorithmic forecast that shows increasing positive signals and improving predictability indicators for 1 month, 3 month and 1 year horizons, arriving at the I Know First prediction for 1 year with signal of 225.35 with predictability level of 0.6.

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Past I Know First Success with Wix

In a 14-day forecast dated February 4, I Know First’s algorithm indicated strong growth for Wix. On February 18, Wix had returned 23.03%, showing the accuracy and precision with which I Know First has recommended Wix in the past.

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Current I Know First subscribers received this bullish forecast of Wix on February 4th, 2018.

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Overview of the Company

Wix is leading the way with a cloud-based development platform for over 122 million registered users worldwide. Wix was founded on the belief that the Internet should be accessible to everyone to develop, create and contribute. Through free and premium subscriptions, Wix empowers millions of businesses, organizations, artists, and individuals to take their businesses, brands and workflow online. The Wix Editor, Wix ADI, a highly curated App Market, and Wix Code enable users to build and manage a fully integrated and dynamic digital presence. Wix’s headquarters are in Tel Aviv with offices in Be’er Sheva, Berlin, Dnipro, Kiev, Los Angeles, Miami, New York, San Francisco