4. Wix.com Ltd. (NASDAQ:WIX)
10-Year Revenue Growth Rate: 29.83%
Number of Hedge Fund Holders: 46
Wix.com Ltd. (NASDAQ:WIX) is an Israel-based cloud web development platform, which allows individual and business users to build professional websites and online stores. The company operates on a subscription model with around 222 million users, 85% of which are on annual and multi-year subscriptions. The company has a 102% net revenue retention rate.
On January 13, Elizabeth Porter upgraded Wix.com Ltd. (NASDAQ:WIX) to Overweight from Equal-weight, increasing her price target from $248 to $276. The analyst mentioned that the use of AI-related innovations and a steady growth in the company’s partner segment is generating strong free cash flow for the company. However, the current valuation does not reflect these positive developments.
Moreover, Lakehouse Global Growth Fund in their November 2024 investor letter mentioned that Wix.com Ltd. (NASDAQ:WIX) is focused on innovation with almost 40% of its workforce deployed in R&D. The fund also mentioned that while the significant driver for the company’s growth has been the Do-it-Yourself (DIY) category. Its new product Studio aimed at professional web developers will drive future growth. This new product will compete with WordPress, which holds around 60% market share. Management is already witnessing excellent results from Studio as 75% of bookings from new partners were driven by Studio accounts during the fiscal third quarter of 2024.
Here’s what Lakehouse Global Growth Fund stated regarding Wix.com Ltd. (NASDAQ:WIX) in its November 2024 investor letter:
“At the portfolio level, the biggest contributor to performance during the month was Wix.com Ltd. (NASDAQ:WIX) (+34.6%). This is a new position and, so far, things are playing outwell with the company delivering a series of earnings results ahead of expectations – more on Wix below.
Lastly, we’ll wrap things up with a brief introduction to one of the Fund’s newest positions, Wix.com (“Wix”). Wix is a global leader in website development, providing critical infrastructure that enables over 270 million individuals and businesses to create, manage, and grow their online presence. Since its founding in 2006, Wix has always maintained a relentless focus on innovation, with 40% of its workforce in R&D. It has developed a comprehensive suite of tools beyond basic website building, including e-commerce, payments, and marketing solutions. The company exhibits a sticky subscription-based model, with 85% of users on annual or multi-year plans and an impressive 104% net revenue retention rate.
Historically, Wix’s primary focus has been on self-creators (think individuals and SMBs) who are looking to build and manage a website themselves. Whilst this DIY category has been a significant driver of the company’s growth to date, what got us particularly excited about Wix was the success of their new product aimed at professional web developers called Studio. This “do-it-for-me” (DIFM) market has long been dominated by WordPress which holds roughly 60% market share, however, Wix has recently started making inroads. Wix Studio simplifies the process for partners (agencies and freelancers) to build their clients websites on the Wix platform and the use of revenue sharing arrangements effectively transforms these partners into distributors for Wix…” (Click here to read the full text)
