Today we have a very speculative idea: invest in an Israeli Wix website builder (NASDAQ: WIX), in order to capitalize on the rebound of stocks after their strong fall.
Growth potential and validity: 27,5% behind 20 Months; 59,5% behind 3 of the year; 125% behind 9 years.
Why stocks can go up: they recently fell hard, and the company's business has good potential.
How do we act: take now 156,65 $.
When creating the material, sources were used, inaccessible to users from the Russian Federation. We hope, Do you know, what to do.
No guarantees
Our reflections are based on the analysis of the company's business and the personal experience of our investors, but remember: not a fact, that the investment idea will work like this, as we expect. Everything, what we write, are forecasts and hypotheses, not a call to action. To rely on our reflections or not – it's up to you.
And what is there with the author's forecasts
Research, like this and this, talk about, that the accuracy of target price predictions is low. And that's ok: there are always too many surprises on the stock exchange and accurate forecasts are rarely realized. If the situation were reversed, then funds based on computer algorithms would show results better than people, but alas, they work worse.
So we're not trying to build complex models.. The profitability forecast in the article is the author's expectations. We specify this forecast for the landmark. As with the investment idea in general, readers decide for themselves, it is worth trusting the author and focusing on the forecast or not.
We love, appreciate,
Investment editorial office
What the company makes money on
This is an Israeli company, whose virtual toolkit allows you to create sites. How it works, can be viewed in the tutorial video.
Wix has a free version, but mostly business needs features, available only in paid versions of Wix.
According to the annual report, The company's revenue is divided into two segments.
Creative subscriptions — 79,2%. This is a subscription to paid options for creating and managing online content. 85% subscribers take annual plans, 15% pay monthly. Segment gross margin — 78,62% from its proceeds.
Business solutions — 20,8%. It is business management software and services, for example for making payments. Sales of programs are also taken into account here., created by other companies, for example G-Suite from Google. Segment gross margin — 27,84% from its proceeds.
Revenue by country and region:
- North American countries - 58%, US share in the company's revenue — 48,65%.
- Europe - 25%.
- Latin America — 5%.
- Asia with other regions - 12%.
The company is unprofitable.
Arguments in favor of the company
Fell down. Stocks have dropped a lot in the past year.: from 353 to 156,65 $. I think, we can take them in anticipation of a rebound.
Relatively inexpensive. Now the company's shares are only 20% more expensive, how 2 years ago. But since then, her revenue has grown by 60%. Think, that investors could celebrate the company's progress by pumping up its quotes.
Also, the company does not have the largest P by the standards of a loss-making startup. / S — 7,67. And its capitalization is also not very large - $ 8.92 billion. This will make Wix shares more attractive and make it easier for investors to pump them up., who decided to take advantage of the fall in quotations.
The best, certainly, ahead of. Eternal quarantine will contribute to an increase in demand for the company's services as part of the construction of sites, and in terms of servicing the online infrastructure of businesses. So one can hope, that in the long term the financial performance of the company will improve.
What can get in the way
Competition. The competition of the company is made by such services, like Weebly, WordPress, Shopify и Squarespace. Somehow they could be better., in something worse - but the result is the same. The presence of competitors in the market forces Wix to constantly invest very large amounts in marketing and R&D. And it doesn't let hope, that Wix's operations will become profitable in the near future. Therefore it may be, that Wix will be spent on buying up various startups, which will negatively affect its quotes.
Is there a thaw? The big drop in Wix stock was caused by, among other things, and topics, that in August she lowered her forecast for this year's results: the removal of quarantines slowed down the growth in demand for its services. But, how can we see, with the spread of new strains, freemen ended, and the nuts are tightened again, which means, there will be an increase in online activity of enterprises and consumers. Periodic improvement in the epidemiological situation will negatively affect Wix quotes and slow down the growth of its financial performance, to which investors will react extremely nervously.
Accounting. According to the latest report, the company has a large amount of debt: 1,859 billion dollars, of which 720.363 million must be repaid during the year. However, she does not have much money at her disposal.: 294 million on accounts plus 27.988 million debts of counterparties. The company also has other liquid assets: long-term deposits in the amount of 541.324 million and securities in the amount of 417.136 million.
But in general, the company's debt is quite large and will scare away some investors due to the upcoming increase in the cost of loans.. Plus, Wix is unprofitable - this factor contributes to the rapid consumption of its cash reserves.. So you should be mentally prepared for the news of the bankruptcy of the company..
Maybe, for that, to avoid bankruptcy, the company will actively engage in additional share issue. Quotes may suffer from this., if there is not enough demand for new shares.
Israel. The company is Israeli and operates primarily in Israel. This has certain advantages.: high quality of work of programmers at their comparative cheapness, - but in the event of an aggravation of the situation in Palestine, ESG investment funds may begin a campaign of persecution of Israeli issuers. It is better to take this risk into account..
What's the bottom line?
You can take shares now by 156,65 $. And then we have three options:
- wait 200 $. Think, then you'll have to wait 20 Months. But, Considering, how quickly the situation with new strains is developing, maybe, we will reach this level faster;
- wait 250 $. Here it is worth counting on the deadline 3 of the year;
- hold shares 9 years, to see, how will they get back to the mark 353 $. well, or how the company goes bankrupt.
But you should keep in mind, that the idea is very speculative and these shares will be volatile.
