Is Wix Stock A Buy?

Wix.com Ltd (NASDAQ:WIX) is an Israeli web development company that offers a drag-and-drop rival to Shopify Inc (NYSE:SHOP). This cloud-based approach lifted it to impressive sales and a rising stock price to match.

With the economy set to recover and pandemic tech stocks losing steam, is Wix stock a Buy?

The company generated a ton of business in 2020 – total revenue of $989 million is a 30 percent increase from the prior year. On top of that, it has a solid balance sheet that gives it room to reinvest into platform development and growth.

But small businesses weathered a tough pandemic and are still in need of government stimulus funding. This is the company’s biggest growth market, as large businesses often have their own in-house web development teams.

However, it’s during unique market conditions like this that small businesses innovate. And Wix provides the tools for small business to compete with enterprise online.

Wr checkout Wix to determine if investors should put it in their shopping cart during the dips or if it’s a turnkey disaster for portfolios.

Wix Payments A Growth Lever

Wix is a Tel Aviv-Yafo, Israel-based ecommerce platform that help businesses get online. Like WordPress and Shopify, there are multiple tools and add-ons that help you personalize the experience to your business and resources.

The company benefited greatly from the pandemic and is pushing to integrate even more tools, like social media connectivity. Building a website is a fundamental part of being in any business these days, but it’s not the end.

Google, Facebook, Amazon, and others all have important platforms that you need to be listed on. And social media platforms like Facebook and Twitter are often used as customer experience and contact channels.

And the company introduced Wix Payments to further vertically integrate as a full-service web solution for its users. In addition to streamlining payments, it launched Editor X in 2020, which provides even more options that makes Wix more competitive with its rivals.

This omnichannel approach is necessary to compete in today’s market. The COVID-19 pandemic accelerated a digital transformation, and Wix is the preferred platform for small businesses with limited resources to dedicate.

Web development is neither easy nor cheap, and providing these capabilities in a turnkey solution has investors pondering Wix as a possible long-term investment.

Is Wix Stock A Buy?

Wix had a market capitalization around $20 billion, as of Q1 2021. This is based on a share price of around $350 per share.

The company went on a tear, jumping from a 52-week low of $76.81 during the March 2020 crash to trade in the $250.00-$300.00 range. By 2021, the price had jumped again to the $350.00 range as the company announced it hit 200 million users.

It generated $989 million in the 2020 fiscal year, which is a 30 percent increase from the previous year. The influx of businesses moving online increased subscriptions to $878 million, while growth in Business Solutions increased 95 percent for the year.

This growth has investors believing it can legitimately compete with the larger brands in the space. In fact, it’s seen as a value play compared to Shopify, which trades for 60x over its earnings. But there are risks involved for Wix investors.

Wix Is No Amazon.com

Wix isn’t Amazon – in fact, the company helps small businesses build their own presence that helps them compete with Amazon. And that means the Seattle ecommerce giant will inevitably be interested when it sees its market potential.

The company’s subscription-based model is great for businesses that want to get online, but some businesses want more control over their owned web properties. Link building is expensive, and it’s rarely good to give someone else control of those assets.

While there will always be high demand for it’s out-the-box approach, some people will always prefer the alternative. Putting their web domain in the hands of an outsourced vendor can be a scary proposition for some.

Because it’s based in Israel, it could have trouble expanding in some global markets too. Geopolitical issues and trade wars don’t just limit American and Chinese companies. 

And that’s what keeps some online businesses using Wix competitors.

Wix Needs To Provide Omnichannel Online Solutions

Wix is a relatively new player compared to the legacy rivals mentioned above. Shopify has long been known as the premier out-the-box solution for businesses to build their ecommerce presence. Even it has limitations that push some users to WordPress and other solutions.

Some companies have intricate SEO and content marketing efforts that could bypass the need for Wix, and these are accessible to small teams too.

And the web is changing with mobile devices. Apps are taking over websites, and many businesses are generating more revenue from their mobile apps than their websites.

This creates a bunch of options for businesses to get online. In fact, it’s necessary to get listed on as many as they can handle to create an omnichannel presence. For Wix to thrive, it needs to incorporate all aspects of the new digital landscape.

And it’s not the only company working on it, nor is it the only solution.

Is Wix Stock A Buy? The Bottom Line

Wix is a turnkey website and ecommerce solution for businesses to get online. It has lots of tools to customize your web presence to fit your every need. This helped it build 200 million paying subscribers as the pandemic forced small businesses online.

But it’s not the only marketplace in town. Amazon (AMZN), there’s Etsy (ETSY), Walmart (WMT), eBay (EBAY) and others are vying for businesses to use their platforms.

And competitors like Shopify (SHOP) and WordPress will always have a presence online. This could limit potential growth, but the short-term outlook is great.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.