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

Analysts Brent Thill, Michael Turrin and Brian Fitzgerald believes Wix.com is on pace to deliver three straight years of 40 percent, plus, annual revenue growth, with revenues accelerating in 2017.

At the time of writing, Wix.Com was slipping 1.07 percent to $60.30.

While noting that Wix.com's shares are down 18 percent since the second-quarter earnings release, though up 36 percent year to date, Jefferies said it sees the reaction as overdone. Accordingly, the firm said it would be buyers on the pullback. The firm attributed the negative reaction post the Q2 results to the company refraining from raising its annual guidance for the first time in two years.

The positive opinion was premised on the company's sustained premium growth, its rapid product innovation and the company's pursuit of a massive market opportunity.

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Reaccelerating Sustained Premium Growth

Jefferies noted that the company now has more than 100 million registered users and nearly 3 million paid subscribers, with its business model combining an online go to market strategy with a differentiated freemium approach.

This model, according to the firm, has helped the company drive premium growth, including three straight years of 40 percent, plus, revenue growth. In the first half of 2017, the firm noted that the growth pace accelerated to more than 50 percent.

Innovation And Focus On Small Businesses

The firm indicated that the company's investments are now translating into material improvements in collections, with average collection per new subscriber accelerating from flat growth in the second half of 2015 to 16 percent growth in the fourth quarter of 2016.

"Over the past 18 months, the company has delivered a redesigned website editor, enhanced mobile solutions, ADI (artificial design intelligence technology) which helps users build a website in minutes, and multiple vertical applications," the firm added.

Massive Market Opportunity

Although Wix.com is small relative to competition, the firm said it is growing much faster than the field. The firm thinks the company is taking share within these markets. The firm also delved on the huge potential offered by the global small businesses, which it estimates to be 420 million.

"We think Wix's techfocused, product-centric approach is the right strategic approach for this market, and expect the company will continue to gain share over time," the firm added.