E-commerce was a top investment theme in 2020, and as the pandemic rages on, it's cementing online business as part of the new normal. Wix.com (WIX 2.05%) isn't the most well-known name in the industry, but it deserves some love.
The company on Wednesday reported a 38% year-over-year increase in revenue during the final months of 2020, and expects full-year 2021 to notch a similar pace as last year. That's an impressive outlook given the company will have a high bar to clear after the surge in activity it reported at the onset of the COVID-19 lockdown.
Here's why Wix should be on investors' buy lists.
Image source: Getty Images.
Recapping 2020: Wix had a banner year
The catalysts propelling e-commerce higher last year have been well documented, but Wix is an oft-overlooked player. E-commerce is, after all, more than just purchasing basic goods on Amazon or getting groceries delivered. There is a whole world of business out there that has been disrupted by lockdowns and social distancing. If you can name it, Wix has a web solution for it -- from attorneys to your local restaurant to the casual blogger.
This massive migration to the internet continued in the fourth quarter of 2020. Wix said it added 7.4 million users during the period, ending the year with a total of nearly 197 million. Premium subscriptions are the real growth driver here, though, and that metric soared. The company added 185,000 premium accounts in Q4 (more than double the net adds a year ago) and ended 2020 with 5.5 million premium subscriptions.
The result was the aforementioned 38% year-over-year revenue increase in Q4 to $283 million. Free cash flow did decline 38% from a year ago to $23.1 million as Wix reinvests some of its profits into the business to foster more growth, but free cash flow profit margin was nevertheless a healthy 8%. Added to the full-year total, Wix had a banner year in 2020.
|
Metric |
2020 |
2019 |
Change |
|---|---|---|---|
|
Registered users |
197 million |
165 million |
19% |
|
Total premium subscribers |
5.5 million |
4.5 million |
22% |
|
Revenue |
$989 million |
$761 million |
30% |
|
Free cash flow |
$129 million |
$127 million |
2% |
Data source: Wix.com.
Wix is more than just a simple website creator
Within total revenue, the smaller business solutions segment ($205 million last year, compared to $783 million for recurring subscription revenue) grew 75% from the 2019 total. While Wix should keep adding new subscribers, it's these added business services that will really move the needle. As a result, the preliminary outlook for 2021 is for revenue to grow at least another 29% -- including at least 35% year-over-year growth in the first quarter.
This is significant because many investors worry that e-commerce growth will slow in the next year as it starts to lap the boom experienced at the onset of the pandemic late last winter/early spring. But Wix's outlook implies momentum will carry over into the new year. Clearly, its services geared toward helping entrepreneurs and businesses of all sizes remain in high demand.
A notable recent software release is Wix's Editor X, billed as the world's first fully collaborative website creation platform geared toward developer agencies. Editor X comes complete with the low-code and no-code design studio Wix is known for, as well as the ability for multiple team members to remotely work on a site simultaneously. This further reinforces Wix as not just an e-commerce bid, but also a top work-from-home stock.
At 16 times trailing-12-month revenue and less than 13 times 2021 expected revenue, Wix.com is an underrated global e-commerce investment. It trades for far less premium than many of its peers (Shopify, for example, trades for nearly 68 times trailing-12-month revenue). Wix.com is benefiting from the long-term growth of digital commerce and steadily releasing new tools to support the new online economy. I remain a buyer after the Q4 2020 report.
