Wix Rally `Nowhere Near' End After 200% Gain, Chairman Says

(Bloomberg) -- Shares of Wix.com Ltd., whose platform simplifies website creation for small businesses, have tripled in the past year but the company's chairman says the rally is “nowhere near” finished.

That's a bold claim for the Tel Aviv-based technology firm that in February recorded its first quarterly profit since its founding 11 years ago. Wix, which relies on the “freemium" model where customers pay to upgrade an otherwise free product, plans to launch new features and expand its marketing efforts to build on its 100 million users. 

“There's no reason Wix shouldn't have one billion” users, chairman Mark Tluszcz said in a phone interview. “Every single tool, every single functionality that you need to be able to run your business online, Wix provides and you won't have to go anywhere else.” 

To get there the company must beat competitors such as Squarespace Inc. and Weebly Inc., and will spend nearly 40 percent of its projected revenue on marketing to do so. Wix has earmarked $150 million for high-profile campaigns such as $15 million Super Bowl ads, and sponsorship of teams like the New York Yankees to capture more of the $26 billion U.S. web design service market, Tluszcz said. The company had 2.5 million paying customers at end-2016, a nine percent quarterly increase.

Shares have risen 198 percent over the last twelve months, boosting Wix's market capitalization to $2.6 billion.

6150% Return

Tluszcz wears two hats as it relates to Wix. As chief executive officer of Mangrove Capital Partners SA -- a Luxembourg-based venture capital firm that is Wix's largest shareholder -- he invested $8 million over several funding rounds, an investment that he says is worth about $500 million today. 

Reconciling his role as Wix chairman with his responsibility to Mangrove's financial backers, who eventually expect a cash payout on their investment, isn't always easy.

“What they see is this tech company from Israel and the stock market at all-time highs,” he said. “They don't have the view I have as chairman.”

Tluszcz advised Wix's founders against selling the company for $400 million six years ago, and says he's the sole VC investor left from the early funding rounds. He resisted shareholder pressure to sell during more than two years when the share traded below its 2013 initial public offering price.

"Today our market cap is about $3 billion," Tluszcz said. "We're nowhere near reaching our potential."

Analysts seem to agree: Nine out of 12 analysts recommend buying the stock and their average price target implies a 12 percent gain over the next year, according to estimates compiled by Bloomberg.

To contact the reporter on this story: Yaacov Benmeleh in Tel Aviv at ybenmeleh@bloomberg.net.

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Michael S. Arnold, Paul Armstrong