William Blair: Wix Could Have 20% Upside In The Next 12 Months

Cloud-based web development platform Wix.Com Ltd (NASDAQ: WIX) is poised to grow its revenues by a CAGR of over 20 percent over the next five years, according to William Blair. 

The Analyst

Analyst Matthew Pfau initiated coverage of Wix with an Outperform rating.

The Thesis

Wix, which has about 122 million total users and 3 million premium users, has an addressable opportunity of $12 billion — significantly higher than the revenues of $426 million it reported for 2017, Pfau said in a Tuesday note.

That opportunity can expand with the number of websites in existence internationally, and as the company's Wix Code product gains traction, the analyst said. 

Wix's primary growth driver is the addition of new premium subscribers in both North America and other geographies, according to William Blair. 

Wix has an opportunity to increase ARPU through selling functionality like vertical solutions, Pfau said. 

The company's combination of fast revenue growth and positive free cash flow distinguishes it from other software companies, the analyst said. 

"This has been driven by the company's efficient customer acquisition model and favorable working capital dynamics from customers that generally pay annually in advance." 

Apart from revenue growth, William Blair expects Wix to gain leverage on its operating expenses, producing free cash flow growth that comes in ahead of revenue growth over the next five years.

Shares could see 20-percent upside over the next 12 months "if the company continues to execute," Pfau said. 

The Price Action

Wix shares are up about 8 percent over the past year.

Related Links:

Wix Is A 'Standout Premium-Growth Story,' And Jefferies Rates It A Buy

Why Wix Could Be A Major Threat To Amazon

Photo courtesy of Wix.