June 23, 2016 | 11:37 AM by Jaguar | avo@jaguaranalytics.com

Wix.com (WIX): Wizard of Website Design

Wix.com (WIX) is a cloud-based development platform for do-it-yourself website designers catering primarily to individuals and small businesses. Users can build impressive, professional quality websites using an intuitive drag-and-drop interface without any coding knowledge. An extensive database of images and templates is available, and user-supplied images are very easy to integrate. There are “help” buttons throughout and phone support is also available.

Pricing structure has five tiers and offers monthly or yearly packages. Starting at $4.08 per month, the most basic service offers 500MB of storage with the proviso of displaying Wix Brand ads prominently on the users’ website. The company often offers promotions on higher-tier packages that make it worthwhile to upgrade services.

Superbowl Ads

In 2015, Wix’s creative, humorous ad starring NFL legends Brett Favre, Terrell Owens and  Emmitt Smith was seen by 114 million people and resulted in 300 million people engaging in a multimedia campaign on 16 different social accounts.

Based on its success,  in 2016 management partnered with DreamWorks Animation (recently acquired by Comcast (CMCSA)) producing a series of entertaining ads for SuperBowl 50 promoting their website as well as the (then) upcoming “Kung Fu Panada 3″ movie. After this campaign, Wix reported that search term “Wix” topped “website design”  when searching for their product.

Analyst & Investor Day

On June 8th, Wix’s presentation introduced and launched their Artificial Design Intelligence (ADI) website creation product that claims to be able to create and tailor a new website with just a few simple questions, based on each person’s or business’ own needs. “Choosing from billions of high-quality, stunning combinations and possibilities, Wix ADI perfectly matches optimal design and content elements to create a unique, dynamic, and robust website in minutes – no two sites ever looking the same”. The ADI platform uses the client’s own information from social media, Facebook (FB) for example,  and integrates the information into the final product.

Management also talked in depth about their marketing strategy and presented a bullish long-term  target that evidently pleased analysts and investors alike.

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Key Presentation Takeways

  • Subscriber Base – Added a record 170,000 Net premium subscriptions, totaling 1.94 million at quarter end (March 31st). Added 5.3 million registered users, highest quarterly additions in their history.
  • Financial Forecast – Collections from existing users potentially represent $1.5 billion in revenue over the next six years. Trend shows that those people tend to stay on once they have started with Wix. 80% of income is derived from renewals and free mode users converting to paid mode.

wx

  • Increased Collections – Based on historical trends, Wix believes it can reach $500-$600 million in collections by 2018 or 2019, split almost evenly between existing and new clientele.
  • Gross Margins – Company expects 86-88% gross margin as a percentage of collections and adjusted EBITDA of 30% also by FY18/FY19. EBITDA forecast is well above Street consensus of 18%.
  • Sales & Marketing – Management is targeting SGA of 30% and R&D to be 18-20%, currently at 68% and 36%.
  • Net Churn Rate – Wix obtains 10-14% annual growth in subscriptions without any marketing investment. New clients also add to growth.growth
  • Conversions Increase Revenues – Every 100,000 subscriptions can generate $120 million in collections in six years at 85% gross margins, therefore management offers attractive incentives to convert free customer base into paying ones.

newsubs

Target Market

Wix’s main market is the small business owner of which studies show that only half have websites. Medium sized enterprises are also part of their clientele and increasingly, restaurants are added to the list. Newly developed additions and enhancements permit any food service establishment to create menus easily, and most importantly, to enable  customers to place online orders directly from their website, without needing third-party interaction and subsequent cost of commissions.

Client base is quite large, Wix has over 82.2 million registered users and 1.94 million premium subscribers, again showing the importance of converting the free user base to paying ones.

subs

Analyst Opinion

All are post-analyst day

  • Bank of America Merrill Lynch raised price target from $29 to $33
  • Oppenheimer raised price target from $29 to $34, Market Perform rating
  • J.P. Morgan raised price target from $32 to $40, Overweight rating
  • RBC Capital reiterated $35 price target, Outperform rating

Technical Observations

There has been good buying volume since early May, and a large spree on the Bullish reports from June 9th. Price is still above rising trend line with volume congestion at $27.70 and $25.80 offering support. MACD is overbought but declining. Options are available although sparsely traded.

WIX Chart

Final Thoughts

Wix is possibly the most innovative website builder available with features and designs that get continuous updates. They are, in their own words, always keeping pace with the industry’s latest trends. Along with their business management software products and available apps, they have transformed their company from a mere website platform to an effective, easy-to-use, constantly up-to-date operating system for Small and Medium businesses.

#CMCSA#FB#WIX
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