Coronavirus crisis catapults Wix to become Israel’s second most valuable company
After a 260% rise in its share price since the beginning of March, Wix is now Israel’s second-most valuable company by market cap. Nir Zohar, the company’s president and chief operating officer, said that it’s just the start as the coronavirus spurs demand for the company’s website-building tools for small businesses.
“We’ve made a leap from being a consumer product for a particular group to a necessity for many more people. It’s the way many people today are making a living, by selling online,” he said.
In addition, new rules are creating new user needs. For instance, health regulations for businesses in many cases now require them to limit occupancy, for instance the number of diners at a restaurant at any given time. “These were things they didn’t have to think about before. Our platform comes in and helps business owners with just that,” he said.
Wix’s market cap on the Nasdaq was close to $15.8 billion at the end of the trading day. That leaves it behind the cybersecurity company Check Point Software Technologies’ $17.3 billion, but well ahead of the $13.4 billion of Teva Pharmaceuticals (Israel’s traditional No. 1 company) and the $13.5 billion of high-flying NICE Systems.
As recently as the end of 2018, Wix’s market cap was just $4 billion.
On Thursday, Wix reported a second-quarter loss of 26 cents a share (not including one-time items), but that was only because the company was plowing money into marketing to meet the demands of new customers during the coronavirus crisis. Revenue grew 27% to $236 million as customers rushed to move their operations online during the pandemic.
Wix’s shares dipped more than 5% on Friday to close at $291.60 because it missed earnings expectations for the quarter. Nevertheless, Oppenheimer analyst Jason Helfstein raised Wix’s price target to $350 from a previous $305 and reaffirmed its Buy rating.
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Wix offers free basic features for setting up websites, but users must pay if they want to upgrade their site to include services such as shopping carts, individual web addresses and traffic analysis. Wix said it added a record 9.3 million users and 346,000 net premium subscriptions in the second quarter, a jump of 17% from a year earlier.
As Wix users become more reliant on their online businesses, they have to offer more and better services, such as customer service, technical support and coordination with social networks – tools that Wix can provide to them.
“It all has become more and more complex. The coronavirus is accelerating this movement, and the potential is enormous. This applies to any business, big or small. We make all this accessible to our smallest customers in an easy, simple and inexpensive way,” Zohar explained.
With the onset of the pandemic, Wix moved quickly to adapt its tools to the new era and to users who hadn’t troubled to develop the web side of their businesses. Thus, for its e-commerce platform, the company added a host of sophisticated new services for users, such as drop shipping, automated sales tax calculations, streamlined order and fulfillment, and integrated sales channels, including social media and marketplaces.
Zohar stressed that all of the company’s growth came organically, not from acquisitions.
Often acquisitions are done by companies to remove competitors, but Zohar said Wix doesn’t believe in that strategy. “I believe in winning through the product. I want to create a situation where anyone who uses a different platform ends up being disappointed and then comes to us. My job isn’t to acquire a [rival] product that isn’t good in order to get if off the market. I want them to come to us because we have a good product.”
Although Wix’s business is growing in part due to more people and businesses operating from home, the company itself is not an enthusiastic supporter of remote work.
“We believe in working from the office, but we’re operating right now as per the rules,” said Zohar. “When everyone is working together in the same office, there’s a lot of creativity. When an employing is sitting right next to you, it’s harder to take care of him or to help him.”
In Israel between 10% and 15% of Wix’s employees are coming into work every day, down from 50% to 60% during the brief interim between the first and second coronavirus waves. Since the start of the pandemic, Wix has hired more than 600 new staff, including 240 in Israel.
Lior Shemesh, Wix’s chief financial officer, said it was easy these days to recruit. “A lot of companies are in crisis,” he said.