Wix.com (NASDAQ: WIX)
An Israeli company, Wix, offers a software platform for individuals and businesses looking to build a web presence. This includes website building and design, help with finding a URL, and e-commerce tools. With its integrated model, the steady growth of internet usage, and continued product iteration, Wix has grown its paying subscribers substantially over the last decade-plus. With Starboard investors having taken an interest in Wix.com, the company has recently seen an increase in mentions by 112% over the last day, encouraging investors to wonder what makes it such a popular stock. Currently, shares of Wix.com trade at $76.96 each.
There are multiple reasons why Wix.com should be on your radar at the moment, some of them are as follows.
Trailing-12-month revenue hit $1.34 billion last quarter, up almost 10 times from 2014, when the business did $142 million in revenue.
The company recently announced a $150 million cost-cutting plan and 100-employee lay-offs, which could increase profitability in the near future.
Partner revenue was up 75% year over year in 2021 and will help accelerate overall revenue growth once it's making up a greater percentage of the mix. Beyond 2022, expenses for Wix's partner revenue are scheduled to mitigate, allowing it to gain operating leverage and unlock FCF once again.
Over the next three years, management expects revenue to compound at a 21% to 23% annual rate.
Wix's management has outlined a plan and goal of getting to $2.5 billion in revenue by 2025, which could get Wix to a market cap of $8.8 billion, or a share price of about $156.
At a current market cap of $4.8 billion, that would give the stock a forward price-to-free-cash-flow (P/FCF) of 9.6, which is cheap no matter how you slice it.
Although Wix.com has generated a lot of positive hype, there is still a reason to be cautious before taking a position in the company. Here is one of them.
Wix struggled to show it can generate consistent profitability, with free cash flow at negative $51 million over the last 12 months.
Wix is undervalued at 3.5 times sales, and although it’s been in a bit of a slump, there are lots of investors (supported by the Starboard decision) that have taken an interest in the company and believe that it could make a solid comeback as share prices are currently rising. Now would be the perfect time to invest in the company before prices go back up, especially with its positive outlook and continuous efforts to cut costs and increase profitability.
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