Wix.com is Plotting Its Takeover "It is clear that we can now become a dominant player on the internet," says Wix CEO Avishai Abrahami.

Wix.com (NASDAQ: WIX), a cloud-based development platform provider, reported its Q4 2020 earnings in February. We'll get to the numbers, but as impressive as they were, what Wix.com CEO Avishai Abrahami said was even more impressive:

"It is clear that we can now become a dominant player on the internet, and I expect us to strengthen this position significantly over the coming decade. Wix will now strive to become the main engine of the internet, democratizing access and providing a place where the majority of people will build their web presence. My goal/belief is that at this rate of growth, in the next 5-7 years, 50% of anything new built on the internet will be done on Wix."

Most businesses have made their online operations a top priority over the last year. WIX has benefited from that prioritization, but this isn't a one-off event – it is an acceleration of an existing trend.

The home furnishings product category, for example, had been shifting towards e-commerce at a rate of 2% annually over the last 10 years pre-pandemic. Online penetration in the category was 23% just before the pandemic started. Now it is 42%.

Will that 42% number come down? Or will it stop going up? Chances are, the 42% number will continue increasing. The e-commerce shift seems irreversible and there is a lot of momentum to take it to greater heights. The shift could happen at a slower rate over the next few years due to tougher comps. But in the long run, that 2% average seems like a reasonable expectation.

Granted, that is just one industry; Wix has exposure to many others. But even if the numbers are a little different, the home furnishings category illustrates, broadly speaking, what is happening.

Now let's look at the fourth-quarter earnings release.

Here are some of the highlights:

• WIX's Q4 revenue was $282.5 million, up 38% yoy and above Wall Street estimates of $270.2 million.
• The company lost 3 cents per share in Q4 on a non-GAAP basis, better than expectations of a loss of 11 cents per share.
• WIX ended the year with 5.5 million premium subscribers, up 185,000 over Q3 2020 levels and up 22% yoy.
• com is predicting Q1 revenue of $291 to $296 million, up 29-30% yoy and above consensus estimates of $288 million.
• The company expects revenue of $1.272 billion to $1.286 billion, above estimates of $1.26 billion. At the midpoint, that would equate to 29% yoy growth, a slight slowdown from the 30% yoy growth for full-year 2020 revenue.

Okay, so what does this all mean?

The fact that Wix.com is expecting revenue growth to be roughly the same in 2021 as in 2020 is very impressive. The company is going to face tougher comps and does not have the same type of COVID-related tailwinds this year.

One of WIX's biggest sources of long-term upside is converting its free users into paid subscribers. Wix.com had 196.7 million registered users as of December 31, 2020, up 19% yoy over Q4 2019. Only 5.5 million, or less than 3%, of WIX's users have paid subscriptions. Compare that to Spotify (NYSE: SPOT), where nearly 50% of those using the service are paid subscribers, and you start to see what is possible for Wix.com.

The Valuation is Lofty… But Reasonable

WIX is trading at 14.9x forward sales and the company is not expected to turn a profit for the next couple of years.

At first glance, that looks like an unjustifiable valuation, but dig a little deeper and you realize that Wix.com is the type of company that can grow for longer than you expect. The current valuation might seem too low in hindsight if Wix.com achieves its full potential.

How Should You Play WIX?

Wix.com shares surged to fresh all-time highs after the company reported its Q4 earnings a couple of weeks ago. Shares haven't given up much ground since.

You could insist on a pullback before getting into Wix.com. But that pullback may never come.

Shares aren't too extended now, so it might be best to pick up some WIX shares sooner rather than later.