1.0 IntroductionI do think Wix deserves to be a case study in many business/marketing schools from different angles. There’s a product aspect, marketing, acquisition, share buybacks, and all come together into what I’d consider one of the companies with the most irrational stock price movements.I am bullish on Wix, and aim to build a position over the next few months (should the price remain at these levels and the fundamentals don’t change).2.0 The business (and the irrational market reaction)Wix started in 2006, and its revenue is divided into two categories:Creative subscriptions (71% of revenue, 82% gross margin), which is all about existing online:Wix premium plans (hosting, custom domain connection, removal of Wix ads, and on some tiers, commerce features)Domain registrationWix Studio SubscriptionBase44 (Since 2025), which is a separate topic later onBusiness solutions (29% of revenue, 30% gross margin), which is all about running a business on top of the website:Wix paymentsPoSShipping/commerce toolsBusiness e-mail (Google Workspace resold)E-mail marketingManaging paid adsBoth of these categories trend in the right direction. If you were shown only this chart, you would’ve concluded that this is a stable business, which would be correct, as the revenue is largely recurring. However, if you look at the share price movement above, the volatility isn’t justified by the revenue change over time. So, what caused the increase and subsequent decrease?I see 4 different narratives:The pandemic had a significant impact on everyone’s schedule, and many started an online business. Wix benefited from that, and the user base kept growing.The 20% user growth in 2020 (vs. 2019) seems to have been extrapolated into the future by the market. The share price overreacted.What followed afterward was the normalization that took place for all pandemic beneficiaries, a normalization to more normal levels. Worth noting that fundamentally, Wix continued to perform well (as seen both from the revenue and the user growth charts). Worth noting, ~2% of all users are paid users.In August 2023, Wix launched Studio, which was a separate platform built specifically for agencies and freelancers who build sites for clients. This was (and still is) a huge success, as a partner is worth 10s of self-creators, and in addition, a higher retention rate. In 2024, the partners’ revenue grew 30% YoY, reaching $610m. Excitement? Check. Extrapolation? Done again. Share price? Up.Over the next year, both revenue streams (partners and self-creators) kept growing. But the partners’ growth wasn’t 30%. It was 23%. Add to that the AI narrative that vibe-coding is the future, and the narrative changes again.3.0 The elephant in the room (Base44)Let’s address the elephant in the room. What if Wix is actually getting disrupted, and vibe-coding (or creating websites/apps by prompts) is the future?In that case, Wix will have fewer users over time (users will churn, and acquiring new ones will be a challenge) and its revenue will go down.To “disrupt” itself, in 2025, Wix acquired Base44, an AI app-builder, and the acquisition price will be above $200m (including the earn-out payments through 2029). When acquired, the ARR was $10m (which was within 6 months of existence).Here’s how its ARR developed over time.This is fascinating growth. Base44 is in the same bucket as Lovable, Cursor, and Replit, companies that are valued at 13-25x ARR.If relative valuation is used and the lowest multiple is used, Base44 is worth ~$2.1b. You could (and should) argue that the multiple is too high, but in any case, the ~$200m acquisition price seems like a bargain.How much is Base44 worth?The management doesn’t disclose its profitability, and I tried to derive some of the data myself. In a recent podcast appearance, the Wix CEO and co-founder disclosed that there are 400 people working on Base44 (below is the link for those interested; great interview).Below is my best estimate of its current profitability and valuation depending on where the ARR “plateaus”.I use 40% as gross margin (instead of the current 67%), as this business model is inference-heavy. The company has its own proprietary model, which could be an advantage in the long run. I’m likely underestimating the long-term gross margin, as I do prefer to be conservative in my assumptions.Note: The income statement impact of owning Base44 is significantly worse today than indicated in the first column, as ARR is NOT fully reflected as revenue.In the interview above, the CEO mentioned that Base44 would be valued close to the market cap of Wix (which is $2.1 billion), given the multiples of Replit, Lovable and Cursor.Let’s not forget, Base44 contributes less than 4% of the revenue. We still need to value the remaining 96%.Subscribe now4.0 Historical Financial PerformanceThe fact that 400 employees were allocated to Base44, which didn’t exist a year ago, shows a lot about the management’s style. They make bold choices.This is also reflected in the profitability below.None of the revenue growth is being captured as profit. All decisions made have one goal: to grow. More revenue? Higher marketing spend and higher R&D spend.If Base44 wasn’t acquired, its operating profit would be close to $200m (no need for the 400 employees, lower marketing spend, no training on its own model, etc).But that’s not all. In addition, Wix had a 20% reduction of the workforce this year, which will lead to $150m in annual savings.Adding that on top would bring the operating profit of Wix excl. Base44, after restructuring, to $350 million.5.0 ValuationThere are different ways to approach this, and I think the sum-of-parts approach is the way to go here.The fair value in both scenarios is above the current share price.Reversing the current market cap means either:The market is valuing Base44 at $1.1 billion today (7x ARR), which translates to not believing it can grow as much as the other competitors. So far, there’s no data to support this.The market doesn’t believe Wix will continue to do well over time. There’s no data to support this either.6.0 Capital allocationWix is generating over $500m in free cash flow per year (a large part due to the share-based compensation), and is buying back shares aggressively, as management believes the company is undervalued.In 2026, they purchased 17.6m shares (about a third of the outstanding shares) for $1.6b (average purchase price of $91/share)! Of course, at today’s share price, they could’ve purchased more shares. Paying $91 per share indicates that the management thinks the fair value is significantly above that level.This buyback was mostly funded by a $1.15 billion convertible note they issued in September 2025 at a rate of 4.75 shares per $1,000, which means for the holders to convert it, the share price should be above $210/share (significantly above today’s price of $51). The coupon rate is 0%. Great financing decision (and not the first one).This is NOT investment advice. Everything above is for entertainment, informational, and educational purposes. Do your own due diligence.Subscribe now