The Internet has greatly changed the way we do business, which has prompted several companies to add online platforms to their operations. However, the biggest change brought by the Internet may yet be the ability to start a business, which as of now is far easier than it was a couple of decades ago.
Wix.com (WIX, Financial) is an Internet-based company that develops and markets Internet services, which allows users to create web content. It offers web development, design and management solutions and apps through an online platform that enables its user base of businesses, organizations, professionals and individuals to create digital presence.
As such, people can use Wix to start online businesses, or extend their services to online customers by creating a platform where they can sell their products/services. Starting an online business is one of the easiest ways of becoming an entrepreneur especially due to the little capital required to get started.
This fact has helped Wix grow massively in a short time since its founding in 2006, despite the obvious competition posed by other providers such as WordPress, Google’s (GOOG, Financial) Blogger, and Drupal, among others.
George Soros (Trades, Portfolio) likes WIX
Wix is currently a small cap stock with a market capitalization of about $780 million, which means it may not be the most liquid Internet stock in the market at the moment. However, it appears to be capturing the attention of some of the most prominent guru investors, like George Soros (Trades, Portfolio).
Soros bought a stake worth $1.16 million in Q1 2015 and added to it in the second quarter, raising his holding to 341,310 shares acquired at an average price of $22.71 for a value of about $7.75 million as of June 30.
Shares of Wix have recently plunged to $19 per share following the announcement of Q2 results. The company’s stock price had rallied to a high of $28 at the end of July.
The company’s stock price has been volatile, which is reminiscent of Internet stocks, but still has enjoyed some major upward movements especially the one from March through July.
The current price level of $19 is closing in on the 52-week low of about $15, but investors appear to have turned the trend. Based on recent performance there is more room to aim at going up than down.
Growthwise, WIX looks promising
In the most recent quarter, the company posted a strong topline and a positive adjusted EBITDA of $3.5 million for the first time in its history, thereby signaling a huge potential for growth. Wix reported $57.4 million in collections for Q2, or $61.7 million excluding foreign currency impact, which represented 44% or 55% growth year-over-year, respectively.
Revenues increased 43% to $48.6 million from the same period last year while the company’s net premium subscriptions increased to 1.5 million after adding 132,000 during the quarter. The company also managed to lower its GAAP net loss to $12.3 million, or $0.31 per share compared to a GAAP net loss of $13.8 million or $0.37 per share reported in the same period last year.
The non-GAAP net loss of $8.2 million or $0.21 per share beat analyst estimates of $0.22 per share, and also represented an improvement from Q2, 2014 non-GAAP net loss of $10.4 million or $0.27 per share.
The company added nearly 5 million registered users in the most recent quarter to bring the total to about 67.5 million as of June 30, representing a massive 34% increase from the same period last year.
The company expects collections to increase by about 38% year-over-year for Q3, and about 45% net of foreign currency impact, while revenue is expected to grow by about 40% for the same period.
Wix has amazing projects running that could trigger more growth in the coming quarters; with mobile web platforms build using its technology having already grown to 9.3 million.
The company also announced recently that it has added Integrated CRM capabilities for small businesses after seeing the “My Account CRM” solution collect more than 164 million contacts. My Account's CRM functionalities consolidate mission critical business functions including contact management, email marketing and automated communications into the Wix platform.
The company spent $4 million on a Super Bowl ad in February, which did not go well with investors, but that spending has contributed very much to the growth witnessed in Q2. Wix plans to spend again during the next Super Bowl.
Wix is highly rated as a website builder as it offers simplicity for website developers, and most of all even novice business owners can build their own websites at little or no charge depending on the package they choose.
In a recent Wix review, the company is rated as one of the best website builders and is growing in popularity among users despite launching just nine years ago.
Conclusion
Right now, there is no point in evaluating Wix from a valuation perspective. However, for growth-focused investors, Wix may yet be a real gem when looking for long-term value. The company operates in the volatile Internet information providers’ marketplace, which has seen many stocks rally in the promise of growth.
For instance, Amazon.com (AMZN, Financial) is one of the stocks that have been rallying for years yet with little or no profits on its books. Investors have been buying the stock on the promise that new products and services will provide value for money in the future, and this has seen those who are in it for capital gains rewarded kindly.
As such, Wix offers a promising opportunity especially at this time when it is still a small cap stock, and perhaps Guru investor George Soros (Trades, Portfolio) knows a thing or two with regard to the long-term prospects of the stock. Wix is a buy for growth-focused investors, but patience is required.
