Wix boosted as analysts initiate coverage

The DIY website developer has a market cap of $840 million, less than a month after it held its Nasdaq IPO at a value of $600 million.

Israeli DIY website developer Wix.com Ltd. (Nasdaq: WIX) has a market cap of $840 million, less than a month after it held its IPO at a value of $600 million. The share price jumped 11.9% on Monday, following the initiation of coverage by the investment houses that underwrote the offering. Merrill Lynch and Needham give Wix a "Buy" recommendation, and Oppenheimer & Co. gives it an "Outperform" recommendation.

Merrill Lynch analysts Nat Schindler and Ryan Gee say that Wix is well positioned to lead the fragmented web editing market. "Although there are many small web editor tool companies, in our view, none has anywhere near the scale or ability to invest in R&D as Wix does. Of the 110 million websites created or rebuilt annually, the combined spending by the 50 million sites that Wix could address is $6 billion assuming $120 per year. Wix has significant room for growth."

Schindler and Gee say that Wix's growth has accelerated from 78% in 2012 to 86% in the third quarter of 2013, but predict 55% growth in 2014 and 34% growth in 2015, while noting that their conservative forecast suggests a "sub upside is possible."

Merrill Lynch gives Wix a target price of $23, compared with Monday's closing price of $22.94, 40% higher than its IPO price.

Oppenheimer analysts Jason Helfstein and Jed Kelly give Wix a target price of $25, a 9% premium on yesterday's close. They say that spending by global small businesses (Wix's potential customers) on web presence and applications is growing 17% annually and will reach $16.3 billion in 2015.

Needham analysts Kerry Rice and Shawn Rassouli also give Wix a target price of $25. "We believe Wix has demonstrated a successful formula for acquiring users at scale and ensuring long-term profitability," they say. "While we see Wix’s immediate addressable market as vast, we believe the company could attract market share from even larger adjacent markets."

Rice and Rassouli estimate Wix's average revenue per user (ARPU) at $126 in 2013, projecting its addressable market at nearly $20 billion. They also believe that the company could also pull in revenue from other multi-billion dollar cloud services."

Published by Globes [online], Israel business news - www.globes-online.com - on December 3, 2013

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