Wix Stock: Growth at a Reasonable Price (NASDAQ: WIX)

Khanchit Khirisutchalual/iStock via Getty Images


Wix.com (NASDAQ: WIX) has fallen more than 60% since the start of 2022, with growth gradually slowing in the post-pandemic world. Investors sold shares of Wix in large numbers after disappointing forecasts made by management. Moreover, this fall was accompanied the broader macroeconomic headwinds that plague all tech growth stocks.

However, despite the near-term macro challenges, Wix’s strong fundamentals and trajectory to profitability make it an excellent opportunity to “buy the dip”.

Company presentation

Wix’s main source of revenue is charging customers a monthly subscription in order to gain access to its website builder. Its other services complement its main service by providing customers with logos, domain registrations and CRM tools.

People use Wix for its combination of power and ease of use. Providing customers with powerful features to build industrial-grade websites while making them accessible to the average person. It operates in the website builder market, which Wix believes is worth $62 billion. However, combined with its expansions – serving e-commerce and creative agencies – its TAM is now $211 billion. When it comes to market share, Wix holds 3.4% of the market, behind WordPress (64.1%) and Shopify (SHOP) (6.4%). However, in the simple website builder category (along with Squarespace (SQSP), Weebly, and GoDaddy (GDDY)), it dominates with around 45% market share. Altogether this means that Wix is ​​one of the market leaders. Moreover, its market growth of only 0.6% in 2017 makes it one of the fastest growing platforms in the market.

Website builders market share

Tool tester

Gross earnings

In the first quarter of 2022, Wix recorded revenue of $341.6 million, representing growth of approximately 14% year-over-year. Although revenue exceeded estimates by $1.13 million, it had EPS of -$0.72, which missed the estimate by $0.11. Wix is ​​also lowering its estimates for fiscal year 2022: revenue growth of 10-13% YoY instead of the Wall St consensus of 14.39% YoY. A few factors are hindering the growth of Wix, from the slowing growth that e-commerce is experiencing due to re-openings as well as the Russian embargo and the sudden increase in the value of the dollar.

Fundamentals of sound

However, at a fundamental level, Wix’s subscription model is still going strong. Management reports that retention, conversion and cancellation rates remain consistent. Wix’s ARR (Annualized Recurring Revenue) for Creative Subscriptions is still up 12% YoY and up slightly from last quarter.

Wix Consistent ARR Extension


Even better, improved margins are expected across the board. Creative subscription margins are expected to improve at the high end of the forecast and enterprise solutions gross margin will improve in both scenarios. Additionally, Wix should benefit from its past investments. Although cash flow is currently negative, management strongly anticipates positive free cash flow this year and expects the free cash flow margin to increase by 5 points each year. Based on these management efforts, analysts predict that Wix can become profitable as early as Q4 2023.

Wix Consensus EPS Estimates

Looking for Alpha

Share buybacks

Wix announced a $500 million share buyback plan in April and received court approval last month. This comes from the $200 million buyout program that Wix completed last year. Despite the estimated low double-digit growth, the buyout program signals management’s confidence in Wix’s revenue growth and ability to meet expectations of free cash flow margins to profitability.

With its market capitalization at just $3.47 billion, a buy of $500 million is significant and signals that management thinks the stock is cheap.


Despite Wix’s continued success, its P/S ratio currently sits at a measly 2.7x. Given Wix’s historical P/S ratio, its current ratio is incredibly low and reflects the rushed sell-off by investors who disregard its fundamentals. With revenues still expected to grow by double digits and massive improvements in free cash flow margins, Wix is ​​undervalued by the market and presents a great buying opportunity.

PS WIX Report
Data by YCharts
WIX Consensus Revenue Estimates

Looking for Alpha

Finally, data provided by Yahoo Finance shows that the stock is currently undervalued by more than 14 analysts— with a significant share of ratings issued after the earnings call and given the massive drop in value.

WIX Stock Analyst Ratings

Yahoo finance


Wix mainly suffers from competitive vagaries. Currently, they are expanding into bespoke solutions for businesses, as seen with Wix Stores, Wix Hotels, and Wix Bookings. Expanding into these areas would help Wix generate additional revenue and improve margins (as they take a cut of every sale made by merchants). At the same time, current market leaders such as Shopify hold such a strong grip that it could make such moves futile. In its core business of website building, it faces stiff competition as it becomes increasingly difficult to differentiate its product offerings. Finally, the effect of a recession could have a greater impact on Wix’s products than management anticipated.


Although the company expects more cautious growth, Wix’s product offering in a growing and essential industry, its strong business fundamentals with a clear path to profitability, and its attractive valuation make it a “buy.” even amid market fears.

Comments are closed.