Since somebody brought it up and Smorg mentioned me (I admit I probably would have sold it out had Bear not been so enthusiastic a little while ago.), I thought I would share.
For the record, I’m still enthusiastic. Just recently…
I’ve mentioned it as candidate to double in 2018: http://discussion.fool.com/i-actually-think-wix-could-easily-dou…
I’ve considered that it could be a coiled spring situation: http://discussion.fool.com/things-always-change-32947394.aspx
I’ve noted that while the share price is less than at the end of Feb 17 (almost a year ago), annual revenue is now 424M compared to 290M then. http://discussion.fool.com/trailing-the-market-32937599.aspx
And way back in November I explained why I think the market overreacted to their Sep 17 quarterly report: http://discussion.fool.com/overall-i-liked-the-quarter-no-slow-d…
I haven’t seen any dissenting opinions on Wix on this board. Unless I just missed it, people seem to either agree or be ignoring Wix. That’s fine with me. I’ve added quite a bit and it is now one of my 3 oversized positions (after Shopify and Arista). I think the risk/reward profile for Wix may be the most compelling of the three. In addition to being the least expensive relative to its revenue, Wix may also have the most manageable catalyst still in front of them. Their free cash flow production hasn’t been enough for the market, for whatever reason, so when Wix starts regularly producing positive EPS, perhaps that will compel the market to assign a higher multiple to the shares.
If it’s so great, what gives with the performance in the last year or so???
A few things I’d like to note before I answer:
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It hasn’t exactly crashed. Shares were trading in the 70’s…it’s now down to around 60. It’s basically that the market has cooled off, not that it has seen some fatal flaw in Wix and is dumping it forever.
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In early 2016 the shares were under $20. So the 4x rise from 20 to 80 (and still 60, so 3x) has surely caused plenty of volatility. Not everyone gets the fundamentals, and even if they do, it’s hard to think that a 4x rise in one year is supported by fundamentals. (I think in this case it was.)
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We also can’t ignore the short term: Wix is up from lows below $52/share in the last couple months. There may in fact be such volatility because a lot of traders are trading it. A 15% gain in a month is plenty for a trader, and many who bought at $52 might well have been selling in the past several days as the shares have been over $60.
So my answer: My guess is that like so many before it that have risen so fast, to some it looks really expensive. If you value a stock vs the price it was at a year ago or three years ago, Wix looked insanely expensive in 2017. Those of us who value it based on what the business can generate see it differently. I’m not sure when or if others will key in on this. Perhaps they’ll start to see Wix vs 2017 prices looks cheap now.
Who cares? The point is: what can the business do? If the business is healthy and growing impressively, results will follow. It doesn’t much matter to me when. And I think Wix does constantly serve its users in new and innovative ways, and the way I see it, the financials continually reflect this.
Bear