Wix.com WIX -1.33% helps small businesses get online, and it’s also increasingly helping them with payments. That puts it right in Wall Street’s happy place.
Investors are crazy right now for digital payments. But they are also still coming to grips with what exactly is a payments company. There are the established payments giants, like Visa or PayPal Holdings. PYPL 1.14% But there are also companies that offer services so closely tied into payments—like a business’s mobile app, or sending out invoices—that they become payments gatekeepers. Often these gatekeepers now collect transaction fees themselves.
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Tel Aviv-based Wix is perhaps best known for website building, with some 180 million registered users globally, many of them very small businesses. Typically it isn’t grouped with other payments or e-commerce companies. But its future may have more in common with Shopify or Square than it does with, say, GoDaddy.
Wix shares are already up 44% over the last three months, on the strength of record user growth of 9.3 million in the second quarter and an increase in the share of users buying multiyear subscriptions. And yet it might still have more room to run. It trades at about 18 times trailing sales. Shopify, which helps companies build virtual stores and handles payments, is now around 60 times. Newly-listed BigCommerce, as well as Bill.com and Coupa Software, which are embedding payments in business spending, are all at over 40 times. Wix’s year-over-year revenue growth of 27% in the second quarter is slower than Shopify’s 97%, but its gross margins are also higher.
Wix this year rolled out a new e-commerce subscription offering, including things like shipping tools. This will compete with Shopify’s cheapest tier in the realm of small businesses, especially those rapidly trying to adapt to the pandemic. Plus, only last year did Wix begin to move customers onto its own payment platform and generate revenue from transaction fees. Eight out of 10 users setting up payments for the first time are choosing Wix Payments, according to the company. Wix is also putting its gross margin to work by nearly doubling its marketing spend in the second quarter.
Wix isn’t a cheap stock. But the market is now willing to give immediate credit to some companies for years’ worth of e-commerce and payments growth. Wix doesn’t yet break out its payments revenue. But it likely wouldn’t take much more than one splashy quarter to reignite the flame.
Write to Telis Demos at telis.demos@wsj.com
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