Wix stock pitch (WIX)

Опубликовано: 04 Январь 2025
на канале: Nathan Worden

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Wix Investment Pitch Transcript:

Wix is a website builder where you can design your own website and host it for you.

You pay a monthly or an annual fee, and one of the great things about the business is they have sticky customers that are paying more each year.

Each successive year, they're monetizing users more and more, they've got about 116% net revenue retention.

Every single year, their existing customers are paying more than they paid the previous year because they're getting ancillary products.

And these websites become a real pain to switch.

It's really sticky.

If you needed a website at one point, most of the time, you continue to need that website.

And oftentimes there's upgrades that you want to make to the website that then results in more revenue for WIX.

There's a lot of secular tailwinds that are helping Wix grow its business. Increasing digitalization of the world and more and more things are needing websites.

I think I've built three websites in the last six months. And I'm expecting, I'll be building some more websites in the next couple of years.

I generally don't like some of these total addressable market metrics, but in this case I think that there's just a couple of numbers that help show that this is going to be continuing to grow, and one is that the website builder market is estimated to have an 8% growth rate over the next five years, which is above GDP.

And then we've also got the e-commerce market, even though it's already grown significantly in the last number of years is expected to grow another 50% over the next four years. And it's just further indication that even though these markets seem mature to us, especially in the US there's still a lot of growth ahead and Wix is in prime position to capitalize on that as they continue to grow market share with a market leading tool.

And then furthermore, this is the valuation case, the current price of Wix assumes limited growth.

It's going to current enterprise value to sales multiple of 3.9 times, which implies about a 20 times free cash flow multiple. If they can get to percent free cash flow margins. So in my valuation model, my assumption has been will the multiple steady?— assuming a market, multiple, which would be a 20 times free cashflow, multiple 2% share dilution per year 16% five-year revenue compound annual growth rate.

And this is really valuing only what's considered the creative subscriptions part of their business which is their higher margin business. And that leads to a ten percent five-year annualized, expected return.

So just to summarize double digit annualized returns are attainable when investing in Wix at this price. Great secular tailwinds, a market leading product and sticky customers at a reasonable valuation. It all ultimately depends if they're able to achieve margin expansion they're currently at about break even free cashflow wise, but I'm expecting that'll get closer to 20% free cash flow margins in the years to come.