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  • Andres Chocron

WIX: Time to buy?

Updated: Apr 26, 2022

$WIX Stock Analysis

Hello there! Lets talk about the Israeli tech ecosystem.

Especially $WIX ( Ltd ) What's going on? Is it a good time to buy now that it's almost at the 52 week low? We're going to see two other examples of tech companies that have gone down dramatically in the last 12 months. We're going to see why and what analysts are expecting for this share, especially Wix in the next 12 months.

Lets cover:

How is WIX doing?

It has gone down 68% in the last 12 months from a high of 329 to 93 today. Now the value of the company's 5.38 billion. And let me remind you, it used to be 20 billion above 20 billion. So a big, big drop.

If we check another darling off of the Israeli tech ecosystem, similar web, it has gone down 40% in the last 12 months, and now it's less than a billion dollars and FIVERR one that astonishes me every time I see it. They're huge. They're growing, but they've gone down 71.39% valuing the company at less than $2.5 billion.

If we go back to 2020, 2021, this evaluations would be crazy. Everybody expected this company to continue to grow indefinitely, like in every, acceleration period or bubble period, whatever you want to call it. But there's an explanation of why these companies have been retracting in value. First.

Why is WIX and other Israeli Tech companies down so much?

They don't report earnings. And in a high inflation environment where everything is worth less. If we're talking about the future, then if this company said I'm going to make a billion in a year, a year ago, when everybody expected inflation to remain at two or 3%, that was a billion dollars. Now that we're expecting this inflation to be a 9%, 8%, and many people think that it's going to continue to go up a lot before going down that money is worth much less today. Another important factor is many of these companies require capital to continue to grow. Capital is very expensive when interest rates are going up and that's what's happening everywhere. interests are going up. So the cost of capital in any valuation will have to be adequately fixed

to show the real cost of capital of today, which is very, very different than the cost of capital from a year ago. So all the valuations from all the analysts in the world have to be contracted and have to be, shown with the new reality of the world. Obviously, there's another thing to consider the war in Ukraine has affected a lot.

And in Israel, a lot of tech companies, a lot of startups as well have developer teams and support teams in Russia and Ukraine. And if we're thinking about all these crazy things that are happening in the world that are going to make the economy contract a little bit, we already saw a report yesterday that us consumer is expecting to spend less in the next few years, few quarters.

So if the economies are going to contract, the cost of capital is growing and inflation is very high and nobody can determine when all these measures are going to countereffect the inflation. So it will go down again, two to 3%, then we have to see lower prices. Remember this companies, most of them don't have a PE yet.

So obviously they're going to contract in a period of time. So now we covered that now the fundamentals of WIX and we're going to focus on weeks, remind you if you like these type of videos to subscribe comment. I don't know where it is. and, and like this video, it helps a lot. We're going to see Fiverr.

We're going to see similar web in the next few weeks. I'm going to make videos on them now, fundamentals, let me go here. Sorry. Here. If we check fundamentals, we see that WIX has more than double the revenue from 2018 period to the 2021 from 600 million to 1.269 billion. That's a big, big jump, but there's a few things that I don't like about this accounting, even though I love the company.

Wix is amazing! but is it investable?

I don't know if I said that I love this company. I have an SEO agency and I use them for my clients and everybody's super happy. They're an impressive company. They're spending almost half a billion dollars in cost of goods sold and R and D expenses, 424 million. That's a lot of money. And you can see that they've been growing this cost by a lot, but when it comes to R and D I'm all in because they're software, basically they want to continue to spread the Wix software through agencies because an agency is able to multiply their deployment through all their clients. It's better than going directly to the client. So that's their strategy and they're creating specific products for niches. If you have a hairstyle, if you have a restaurant, if you have a venue, you can use weeks and. Have a good platform to portray your business, sell tickets, create appointments, everything.

They really are creating niche software on top of their Wix platform. So you can, so agencies can continue to offer this to, to clients. We're going to talk about competition in a bit, but that's why R and D and almost half a billion. IM all for it, But the cost of goods sold. That means they're spending a lot of money getting those sales done.

WIX competitors are growing

Competition is mounting up. Competition is nothing to laugh about in the sector. We have Squarespace. We have Wordpress we have DUDA, here we have, Elementor two of the biggest competitions that we see here in Israel, for WIX are coming from Elementor one of the most used plugins to build websites on WordPress.

It's a free plugin, but they're already trying to convert it to bring cash. So, and they're very good. So a lot of people that love WordPress, because if you know anything about web development, you know, WordPress is essential. So a lot of people using WordPress instead of changing two weeks or a new platform, which are.

They're using modern plugins, like Elementor to build a website faster, easier, and deploy them. That's another Israeli company. And actually we can see it here in this article. Elementor and Duda. Duda is a company that's very much like WIX it's also Israeli, they've raised a ton of money, but they lack all those niche solutions.

Space for many in this sector

And they still don't have a network of agencies promoting their platform, but they're big. We also have Shopify. We have Squarespace. There's a lot of people in this space, but the adoption of these technologies continues to grow. And they're going to continue in their space for many, many companies there.

There's no need to believe that one is going to be the end. All be all. So Wix, if you use the software, if not, I urge you to try. It's an impressive, amazing software. So I really, really think that this company is gonna be very successful, but that doesn't mean, I think it's a buy. If we check the finance.

We see that they have actually a negative 25.6% operating margin that tells me that they have to be getting money, from somewhere. So there's a couple of ways you can either sell stuff, get money, you can increase the shares, that means diluting your actual shareholders or loans.

And as we talked earlier, getting loans or it's going to get more expensive. And if we see here, I have open here, we see that the dilution of the shareholder has been going on almost on a constant basis from 2018, that they had 45 million. And today they have 56, almost 50, 57 million shares. So I don't like this dilution.

I don't like owning a company that will require more and more money because I know what they're going to do. They're going to sell more shares, meaning my little piece of the pie is going to get smaller. And I just don't like that. Don't like that. And most investors don't like this, especially in the situation that we find ourselves in right now.

Before I tell you if I would buy this company, even though I think it's a little bit obvious by now, let's check what, the valuation is by analyst.

What is the target price for WIX?

So We see that 16 analysts in the last year. Said that the high price target that they see is 200, the low 85.

And the mean price target is 135.38. That's in the next 18 months, I think 135 would be, a fair valuation for this company. But I do think it's very likely, especially if inflation numbers don't improve we might see this company go down to a valuation of three, $4 billion. That means going back to. $70 per share, I wouldn't be surprised to me, the only reason why I don't like this company right now, first, the shares dilution. I don't like that. They continue to create stock to raise money. I don't like that at all. And especially for a company like this, the competition is growing bigger and bigger. And the instability of the world order right now puts a lot of doubts in my mind. With regards of this company, actually making a profit.

If we see their, their financials, This is just what bothers me. If I saw that their operating margin were getting better, instead of getting worse, I would see that there's light at the end of the tunnel, but we don't see that. So right now for me, WIX is not a buy I sold my shares last year and I haven't been able to go back in because I just don't trust the management to create a profit in the next few quarters and they don't give guidelines anymore. So I don't trust a hundred percent this company that is going to be able to maneuver the. Through these turmoil of a crisis world economic order that we're living in lately.

Would I invest in WIX right now?

So that's for me, I'm not by for now, but I do love the company. I do use them a lot. Even is build on Wix and half of my clients, websites online presence is on Wix. So I do love the product. I just don't think they're going to be able to provide a lot of value for the share holders

in the short to medium term long-term yes, but cost of opportunity. I have better options to put my money right now. That's it? That's my take on WIX hope you liked it. Subscribe like comment. If you don't agree with me or if you do comment as well and then see you in a few days.

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