RESEARCHWIX.TA3 months ago5.2Kviews

Wix: the capex drag just stopped being a drag

This was the first period where incremental revenue from the new fleet exceeded incremental depreciation on it. That crossover was the whole bear case.

Sara Cohen@sara_cohen

The mechanism is a depreciation schedule. Capacity is expensed over its useful life while the revenue it enables lands immediately, so the reported margin is worst in the build year and best two years after it, entirely independent of demand. The disclosure carries it. Management broke out the incremental contribution for the first time and it exceeded the incremental depreciation line, which is the first time that has been true since the build began. The position: long on Wix, entry locked at publication and the exit dated rather than open-ended. The target is stated in the call block above and the horizon with it. Sized to the catalyst rather than to conviction, with the invalidation written into the kill-switch card instead of left implicit. Multiple compression across the sector is the risk that is not company-specific and not hedged here. It would overwhelm the operating argument in either direction.

Discussion · 7

Noa BergmanJUN 30

I hold the other side of this. The regulatory ceiling being quantified changes the model, not just the headline. Has anything in the last print changed the entry you would take?

Sara CohenAuthorJUN 28

Agreed on the first part, not the second. Rates hit the multiple rather than the earnings path. A 50bp move costs perhaps two turns and does not touch the thesis.

Sam WhitfieldJUN 29

Reading this against my own model. The regulatory ceiling being quantified changes the model, not just the headline. Is there a cleaner way to express this than the equity?

Pauline VidalJUN 29

Been long since the last one. The point about conversion rather than demand is the right one. Does the thesis survive a soft guide next quarter?

Ines FerreiraJUN 29

Been long since the last one. The depreciation schedule really is the whole disagreement. What is the level where you would walk away?

Sara CohenAuthorJUN 29

This is the one I get most. Early is a fair criticism of my last one on this name. The difference here is that the catalyst is dated rather than open-ended.

Yael BrennerJUN 28

I came in sceptical. The mix argument is the part I had not considered properly. Has anything in the last print changed the entry you would take?