The e-commerce industry is navigating a testing period, grappling with the impact of global economies reopening and a sluggish overall economy. Wix.com (WIX 1.07%), an e-commerce solution provider, recently reported weak growth figures, echoing the overall weak industry performance.
With investors pondering the potential for a rebound, is now the right time to invest in Wix.com? Let's delve deeper into the company's current standing to uncover the potential opportunities amid these industry challenges.
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Wix's growth fell to a multi-year low
Wix has been an outstanding growth stock. Since its IPO in 2013, revenue has skyrocketed from $81 million to $1.3 billion in 2021, boasting a remarkable 41% compound annual growth rate.
But investors expecting a similar performance in 2022 were hugely disappointed. Revenue grew by 9% year over year, and bookings improved by a meager 4%. Like most e-commerce companies, Wix had a difficult time as it navigated the challenging macro environment.
It didn't help that (concurrent with its weak growth) the company announced a plan to reduce its costs by $150 million, signaling that Wix's hyper-growth days might be over.
While growth investors were disappointed by Wix's 2022 performance, some green shoots are emerging lately. In the first quarter of 2023, revenue grew by 10%, and non-GAAP operating income reached a record, driven by a 24% decline in operating expenses. The tech company also raised its full-year guidance for 2023 after its encouraging first-quarter results.
In other words, while Wix faces external headwinds, it tries its best to adapt to the challenges. So far, its results are encouraging.
NASDAQ: WIX
Key Data Points
There are still reasons to be optimistic about the long term
While the bears have reason to suspect Wix's best days are over, the bulls think the recent slowdown is likely only temporary.
As a start, Wix has a track record of execution and innovation, evolving from a website builder to a complete solution provider that helps businesses succeed online. With Wix, anyone can launch and scale an online business by leveraging its tools like email marketing, e-commerce solutions, analytics, payments, and more.
So long as Wix can keep delighting users with better tools and solutions, it stands an excellent chance to attract new and retain existing users. To this end, its huge registered user base of 243 million -- out of which only 6.1 million were premium users -- presents an enormous opportunity for future growth.
Besides, the recent advancements in artificial intelligence (AI) could open up even more opportunities for the company. Wix can improve its product offerings by leveraging AI to help customers succeed in the AI-driven world.
For example, its AI-enabled website creation platform Wix ADI has been leveraging AI to help customers build websites since 2016. We can expect more AI-enabled products from Wix in the coming years, opening up new opportunities for the company to grow.
So is Wix a good stock to hold for the long term?
Wix faces immediate challenges in cost reduction and growth improvement. Yet, its long-term prospects appear promising, benefiting from the continued growth of the e-commerce industry and advancements in AI.
Moreover, the stock's current price-to-sales ratio of 3.1 times, significantly lower than its five-year average of 9.1 times, presents an appealing opportunity for investors to buy the stock on the cheap.
Investors with a long-term focus and willingness to endure volatility may find initiating a small position in Wix opportune.
