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Bull Of The Day: Wix.com (WIX)

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Enterprises around the world are moving to the internet and are in need of a smooth transition. Wix.com is well-positioned to take on the growing digital demand. Wix (WIX - Free Report) has traded all over the board the past 52-weeks but since Christmas these shares have surged over 20%. Analysts have been guiding their EPS estimates upward on this enterprise of the future and pushing WIX into a Zacks Rank #1 (Strong Buy).

The Business

Wix.com is a subscription service that provides users with a one-stop cloud-based platform for all of their website needs. Wix is based out of Tel Aviv and has been going strong for 13 years. The company provides services to over 160 million users in 190 countries.

The platform enables anyone, no matter their technical or coding background, the tools to develop, create, and contribute. Wix’s product offering gets your business online, whether you are an artist, an entrepreneur, developer, or IT professional.

Wix Editor offers a drag-and-drop website creating software to design and edit any website with no coding background needed. Wix’s Artificial Design Intelligence (ADI) is the first-ever AI-backed program that can design a website for you based on your needs. The firm offers a much broader portfolio of products that could solve almost any website need.

Performance

Wix has built out its product offering substantially since it started back in 2006, and its customer base has grown along with it. The total user base has close to doubled, while its premium paying customer base has more than doubled. Registered users hit 160 million in Q3, with premium users sitting at 4.4 million. You can see the growth trajectory of both registered users and premium subscribers in the charts below, provided by Wix’s investor relations team.

Wix’s subscription-based model enables it to demonstrate quarter-over-quarter growth since the company went public back in 2014. The firm hasn’t seen a quarter with year-over-year growth of less than 25%, and analysts are estimating this will continue through 2020.

Wix has seen tremendous customer retention, and its ability to progressively drive up average revenue per user gives this business reliable revenue streams. Despite Wix toeing the line of profitability, the company has been able to grow its free-cash-flow (FCF) year-over-year consistently, with management anticipating $125 million full-year FCF for 2019 (23% growth). This steady growth in cash flows and $776 million in cash gives Wix financial flexibility that most growing firms are unable to achieve.

The company currently employs zero salespeople with the entire growth of the company occurring naturally through word of mouth, and other organic ways. Wix doesn’t need a sales team because the platform sells itself.

Wix is an innovation-driven company, with 50% of its employees being found in the R&D department. The company continues to drive out new products which further propel its product offering to the top of its space.

Wix’s growing international penetration gives this enterprise a head-up on its competitors because not only does this hedge the firm’s bets, but gives it a massive addressable market.

Competition includes tech powerhouses like Square's Weebly (SQ - Free Report) and Shopify (SHOP - Free Report) , both of which enhances companies’ online presence.

Sell-side analysts like this stock with 12 out of 16 analysts calling this a buy right now.

Look for Wix’s final 2019 report before the bell on Wednesday, February 19th. Analysts are estimating an EPS of $0.27 on sales of $205 million, according to Zacks Consensus estimates. This would represent top-line growth of 25% but an EPS decline of 36%.

Take Away

Wix.com has proven an uncanny ability to drive steady and reliable growth globally. The website making space is saturating quickly, but Wix has been able to stay ahead of the curve. Its ability to retain customers while at the same time increases revenue per user gives me confidence in this stock as a long-term play.

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