Wix’s stock price has crashed to a bear market this year, as it has crashed by over 48% from its highest level this year, as concerns about its growth and the emerging competition rise. It was trading at $126 on Wednesday, with its market capitalization remaining at $7 billion, down from the year-to-date high of $13 billion.
Wix growth is continuing
Wix is a top company that helps users create websites without doing any coding. It operates in a highly competitive industry, where it competes with popular companies like Squarespace, Weebly, and WordPress.
Most recently, the company’s business has come under pressure as newer firms emerged that are helping people build their websites and applications by just description.
One of these companies is Lovable, which crossed the $200 million revenue mark this week and is considering raising money at a a $6 billion valuation.
Wix has moved into the industry by buying Base44, a similar company in a deal worth $80 million. In a recent statement, the company said that it has over 2 million users and will generate $50 million ARR by the end of this year and $100 million by 2026. The CEO said:
“With Base44, we’re extending this mission by bringing the next generation of AI and natural-language development to applications. This is the next phase in the evolution.”
The most recent numbers showed that the company’s revenue rose by 14% to $505 million in the third quarter, with its creative subscriptions rising by 12% to $356 million. Its business solutions revenue rose by 18% to $149 million.
Wix now expects that its revenue will continue rising this year and will be between $1.99 billion and $2 billion. The average estimate among analysts is that its annual revenue will be $1.99 billion.
However, the company expects that its costs will be higher as it ramps up the performance of Base44.
Is Wix cheap or expensive?
A common question is on whether Wix is a bargain or highly expensive as its growth slows and competition rises. Data compiled by SeekingAlpha shows that the forward price-to-earnings (P/E) ratio is 18, ower than the sector median of 23.
Wix has a PEG ratio of 0.36, much lower than the sector median of 0.96. Also, its forward EV to EBITDA multiple is 16, lower than the median estimate of 19.
One of the best ways to value a company like Wix is known as the Rule of 40. This is an approach that looks at a company’s revenue growth and its profit margins.
In this case, the company’s forward revenue growth metric is about 14%, while its profit margin is about 8.90%. This gives it a rule-of-40 multiple of about 22%, making it a bit overvalued.
Wix stock price technical analysis
The weekly timeframe chart shows that the Wix share price has remained under pressure in the past few months. It has moved from a high of $248 in January this year to the current $126.
Wix has moved to the 61.8% Fibonacci Retracement level at $127. It also moved below the 50-week and 200-week Exponential Moving Averages (EMA).
However, the stock has formed a head-and-shoulders pattern, which is a common bearish sign in technical analysis. Therefore, the stock wil likely continue falling as sellers target the key support at $100.
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