Since the last earnings report from Wix.com (WIX) about a month ago, the shares have taken a huge hit. Within that time period, the cloud-based web development services lost more than 31%, causing many to wonder if this downward trend is just the beginning or if Wix shareholders will see some relief.
Wix.com had a 52-week high, but has since fallen roughly 37%. Overall, the company was a good investment opportunity; it typically experienced revenue growth rates above 30%. The stock market, in general, has seen tough times, but we can expect that the strong track record and brand name will keep the company afloat.
Wix’s Recent Expansions
Over recent years, we have seen Wix making huge strides, and making bigger gains in the market than previously predicted. In Q4, Wix collected $226.7 million, which is an increase of 28.8% year over year, and 1-4 million dollars more than it had predicted for Q4. The company also saw an increase in the net premium subscribers, with a 13% increase over the previous year. It added more than 89K new subscribers to reach a total of 4.5 million by the last day of 2019.
Not only did the company add new subscribers, but the company also added 5.8 registered users during Q4, increasing the total number to 165 million, which is a 16% increase. The increase in these two numbers indicates that people are still finding value in its services, despite the recent economic downturn.
At the end of Q4, Wix thought the future was bright and was predicting the next eight years to bring in $6.8 billion in collections, which would be a 33% increase year over year. The reason they were confident about this increase is due to the loyalty of their customers. As users sign up for the freemium or cheaper plans to build their hobby website or business page, they become more used to Wix and the platform. As Wix becomes integrated into the core functions of the business or site, the company is able to provide a more vital role to the site owners, making it more likely that they will continue to use the services.
Back in Q4, everything was looking good, and the profits were up to $150.5 million, which is a 14.9% increase from the previous year. With more cash flow, Wix was able to spend its money on expanding the company through the sales and marketing team and was growing into an even bigger company.
What Is The Situation Now?
Now, we are seeing the stock estimates trending down in the past month. Overall, Wix.com received a strong Growth Score of A. However, where the cloud-based web development service is lacking is in the Momentum Score, where it only received a B. And, the stock was given an F in value, which makes it not a good investment strategy at this time and places the stock in the bottom 20% quintile.
Investment Risks
The coronavirus pandemic is hitting a variety of industries, and small-to-medium sized businesses are feeling the economic squeeze more strongly than larger businesses. As the economy starts to slump further, these smaller businesses are more likely to struggle as business starts to slow down and might ultimately fail. This could mean that Wix could see a greater turnover rate in its business website users as more and more businesses start to go under.
Wix also has to ensure that its customers aren’t switching from their services and going to a competitor, like Weebly, Squarespace, or WordPress. Wix needs to continue delivering high-quality services to ensure that its customers remain loyal users.
Will It Recover?
In the last week of March, we have seen the stock prices of Wix.com jump up and down as the week progresses. As of March 26, 2020, the stocks were up to $119.80, which is an increase of 4.39% from the previous day.
However, almost immediately, we saw the stocks take a big nosedive the next day
In these uncertain times, it is unclear whether this trend will continue or we will see another sharp decline of the stock prices.
Thanks to Wix’s strong brand image and overall popularity, I think it is safe to say that they will weather this storm and come out on the other side in the black. However, a lot of it depends on the competitors of Wix at this time. If Wix has to focus more money and other resources on acquiring and retaining customers, it might mean that its margins will be a little tighter in the foreseeable future. However, once the company has more profitability and better free cash flows, we should see this risk start to decrease.
For investors or potential subscribers to Wix.com, they will have to continue to watch Wix.com to see if it can recover from this economic downturn. As of now, we can only speculate.
