Wix Sep 2018 Quarter

Investment Analysis Clubs Saul’s Investing Discussions
1

Revenue grew 40%, and OpEx only grew 22%. Love it. OpEx growth has decreased all year, which is why you see this trend in non-GAAP EPS:


        Mar    Jun    Sep    Dec
2016  -0.30  -0.09  -0.04   0.06
2017  -0.18   0.00   0.01   0.16
2018  -0.05   0.29   0.39

Last Q I said:

Wix’s PE is 237 (not a typo). However, they just made 29 cents versus 0 cents last June. This PE will come down fast. It’s not unreasonable to think that this quarter’s 29 cents may become 40 or 50 cents in September and much more in December. The market expects just 23 cents and 32 cents, respectively. What will happen? I don’t know. But I know that growth will not be linear.

So I’m not surprised to see the big 39 cents this Q. That 237 PE is down to 116! In one quarter…with a little help from a market downturn. But I see no reason why this incredible EPS trend can’t continue, even if/when revenue growth slows. That said, I like their innovative nature, and I think some of the features they’re adding will keep revenue growing. They seem to be able to do it without spending an arm and a leg, so I’m all for it.

There was a bit of churn this quarter, but they said this is partially because they eliminated their lowest pricing tier, which I imagine will be a net positive long term.

In summary
I do not expect Wix to keep growing at 40%+ forever, but I would be perfectly happy with 30%+, because Wix seems to “get it.” Happy to see the steady progress.

Bear

PS – Even if revenue growth slows some, I’m confident it will still be decent because of:

  1. Their subscription model
  2. Their increasing ARPU (it was up to $162, an 11% increase YoY)
  3. Their deferred revenue balance
  4. The cyclical nature of subscription sign-ups…seems like they always have an influx at year-end
  5. Their innovations like Code and Payments, which will drive some new business
  6. The fact that they put a big emphasis on ROI, and study the long term value of their cohorts, and seem to have a great handle on the return on everything they’re doing
  7. Their partnership with Google (though to be fair this pushes gross margin down a bit)
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