The Growth Story
Over the last decade, Wix saw its revenue grow at an astonishing pace. from the mid 40's pre-2020, to the low teen's today. AI is not new, but every year, it seemingly becomes more capable. I created my first AI site with Hostinger's AI builder back in 2023. It was impressive, but I didn't view it as something that could be utilized by a serious small business.Today, All (but 1 - still remaining on wix) of my websites are self coded with the assistance of Claude Code and hosted via Hostinger. This year, as I have finally built a blog CMS that I am happy with, I will likely move my actual business site from Wix, over to a self hosted custom written site built by me (and Claude). This scenario is the bear case for Wix.
However, I got to thinking about who Wix's core customer is and whether I am part of that group or an edge case. (spoiler - I think that I am an edge case).
I spend my day (when not analyzing companies or in meetings) tinkering with software. So I am obviously comfortable with self coding/hosting my own site (especially with the new tools available to us). With that said, as web design has become more obtainable to me, wix has also made it more obtainable for everyone, including those that dont tinker with tech.
Your local Yoga studio/hair dresser/handyman/etc. Are they going to take time Away from operating their business to figure out how to install vs code, integrate the claude plugin, organize their directory via a self hosting program, and then maintain it?
Sure. Wix will lose the more technical users like myself, but the market will likely expand further from here.
Growth going forward:
With the above said, I fully believe that Wix's days of high growth are over. My model tapers growth from last year's 13% all the way down to 3% by FY32.
My thesis is that the technical cohort (the partners) will utilize the platform less, customer acquisition will be more difficult, but current customers will be more sticky than the market seems to think, and so far it seems to be playing out this way.
We saw a Q/Q slowdown (flat) in the partner segment, but customer retention remains high (NRR: 105%) and this will be a key metric to watch.
I expect a massive collapse in net new users with future growth coming from further monetization of existing. I also forecast that as competition heats up, operating cashflow margins will likely compress (from just shy of 30% last year to 17% by FY32).
due to the commoditization of the industry, I have increased my discount rate from my standard 10% up to 12%, and at $48.5, I see a company that (should the risks not be existential) might be about 40% undervalued with a long term IRR of 13.8%.
This is just a quick update today to get my thesis out there. I will keep watching how this story unfolds, and I will likely put together a more in depth analysis over the coming months. Wix isn't a name that I will be allocating a large percent of my portfolio to, but its a name that could warrant a small position at the current price.