As a value investor, I mostly stayed away from AI-related investment ideas over the last couple of years. Granted, that has not always resulted in the best returns for our portfolio.

Last September, I pitched Dell, and while the business itself didn’t exactly excite me, I did like the idea of gaining AI exposure through data center builds while paying a P/E of 10.

Ultimately, we decided against owning it because the data center economics didn’t look that promising. I’m hesitant to bring it up, but the stock has returned 200% since. Well, it won’t be the last opportunity we will miss. I can guarantee you that.

Today, though, I have another pitch for you that promises AI exposure at a ridiculously low multiple. In Wix, we have the chance to buy the fastest-growing vibecoding tool in the world for free. Yes, you heard right. We don’t have to pay anything for it.

If you buy Wix, a high-margin SaaS business for a mid-single-digit free cash flow multiple, you get Base44, the fastest-growing vibecoding tool out there, as part of the deal for free.

Let’s dive in!

— Daniel

Pitching Wix at a time when even the highest-quality SaaS companies in the world are down 50% might be controversial. But those are the setups that create the sort of asymmetry that I look for.

For anyone who doesn’t know what Wix does, it’s one of the biggest website builders out there. When it was founded in 2006, it was one of the first drag-and-drop builders, which enabled millions of people to build websites without any coding skills.

I wasn’t much of a coder myself, so the 16-year-old me liked that value prop for his first entrepreneurial ventures. And as it turned out, I wasn’t the only one interested in that. There was strong demand for quick, easy drag-and-drop website building. Wix quickly became one of the leading players, growing its user base from a couple of hundred thousand in 2006 to over 300 million last year.

Besides brand awareness, though, there isn’t much of a moat in offering drag-and-drop website services. That’s why Wix started to add a full suite of additional tools to its product. This started in 2014, and you might call it the second chapter in the company’s history.

Wix’s main customer base has been (and still is) small and medium businesses, so the product suite has been expanded with CRM tools, email tools, scheduling, e-commerce, and integrated payments. Wix is obviously not the best in each of these individual tools. Shopify is better for commerce, Calendly is better for scheduling, and Mailchimp or Substack is better for email and newsletters.

But Wix's strength was offering the bundle. Instead of having to pay for and operate five different websites and tools, Wix users could get versions that are good enough directly in the ecosystem. Since I covered Microsoft not too long ago, I can’t help but think of this as a budget version of Microsoft’s bundling advantages for SMBs, with large enterprises.

And it’s working. Wix has a retention rate of 105%, which means not only that customers tend to stay but also that they spend more with Wix over time.

This can also be seen in the historical cohort data. This data shows you how much more profitable cohorts have become. With Wix’s product suite expanding, you would expect newer cohorts to be structurally more profitable than older ones. And that’s exactly how it played out.

The most recent Q1 2026 cohort is more profitable at its starting point than the 2010 cohort after 16 years. The ceiling is significantly higher as well. Cohorts will now reach about $400 at maturity, which is 9-10 times higher than the 2010 cohorts. And the trend of more profitable cohorts continues each year.

The only exceptions are the 2020 and 2021 cohorts, which were growing even faster than the others. This was obviously during the pandemic, when everyone was sitting at home with a revolutionary business idea waiting to be brought to life by a Wix website. Jokes aside, though, it’s a positive sign to me that cohorts keep getting more profitable each year. Despite the AI website and vibecoding tools.

A less positive data point is that Wix’s premium subscriber count, the actual paying accounts, peaked at around 6.3 million in 2023 and has since gone down to 6.1 million. At first glance, this might look like the impact AI has had on the business.

But management argues that this has been a deliberate plan to churn the lowest-margin customers and focus on the high-end users by raising prices by up to 100%. By now, my spidey senses are tingling when I hear management talking about intended shrinking. It’s a welcome explanation for the business slowing down. I’ve seen that in some of the value traps I looked at before.

In this case, though, the numbers back up the narrative. Revenue and bookings are still growing at a healthy clip and have actually started to accelerate since the strategic shift in 2023.

Margins have improved even more significantly. The Business Solutions’ gross margin went from 28% to 32% by the end of last year. And all of that while revenue grew double digits. The Business Solutions segment is the smaller of the two main segments, and it covers all of the value-added and backend tools – Wix payments, CRM, e-mails, etc.

That part of the business is growing at 19% and generates roughly $600 million in revenue. The other segment is Creative Subscriptions. That’s basically the legacy SaaS business. It generated $1.4 billion in revenue, and it’s growing at 12%. One has to be careful when talking about the durability of a company like Wix, but these are not the numbers of a dying company.

Another important metric to look at is Partners Revenue. The so-called Partners are primarily agencies and freelancers who build sites for clients.

Partners generated about $750 million in 2025, roughly 38% of total revenue, and are growing by more than 20%. Partner revenue tends to be stickier because the Partners themselves have little incentive to switch after mastering Wix, and the clients who hire someone to build a Wix website don’t care about (potentially) saving a couple of hundred dollars per year by switching to a vibecoded tool. Which, obviously, comes with a lot of workflow disruption risk as well.

I should note, though, that quarter-over-quarter Partner Revenue was essentially flat for the first time ever. This might be because Partners are shifting to AI tools or the direct competition, such as Shopify or HubSpot. While the reason is difficult to pin down, there’s certainly a multi-quarter drag that one needs to keep an eye on.

Base44 is what makes this investment case exciting to me. There’s no doubt that Wix is cheap, but there’s no doubt either that it operates in the most vulnerable industry in terms of AI disruption.

Wix knows that and decided to participate in the vibecoding hype rather than getting consumed by it.

The founder of Base44 is Maor Shlomo. He’s an Israeli engineer who previously founded a venture-backed company. After his exit, he had some time on his hands, and as his wife ran a small business, he started cobbling together software to help her with scheduling and customer records.

Being an engineer, he couldn’t help but try some of the new AI-native tools that were supposed to make this easy. But despite his software engineering background, he found them quite difficult to use. Especially for people without prior experience. Which, after all, is the target audience.

With the founder DNA still in him, he decided to fill the gap by building Base44. Bootstrapped, paying the inference bills out of pocket, and documenting the journey on LinkedIn. The posts went viral, and after just three weeks, Base44 had 10,000 users. Twelve weeks in, he reached 150,000 users and $1 million in ARR.

Perhaps we should start advertising this newsletter on LinkedIn…

Eventually, Wix noticed Base44’s success, and since both companies are based in Tel Aviv, it wasn’t difficult to make contact. The deal closed pretty quickly in June 2025 – about $80 million in cash upfront, with earnouts running through 2029 based on ARR growth. Talking about ARR, Base44 had roughly $3 million ARR at signing. One year later, it’s at $150 million ARR.

To better understand what Base44 actually is, I would describe it as a wrapper. It doesn’t train its own foundational model. Instead, it sends prompts to Claude or Gemini, which write the actual code. Lovable and all other vibecoding platforms work the same way.

Now you might ask yourself, why would you pay for a wrapper when you can just go to Claude or Gemini directly? The short answer would be: for simplicity and the backend. The long answer is that I started my own little vibecoding project in recent weeks, and while it was way easier than actually coding anything yourself, it’s still way too technical for the average person who wants to set up a yoga website.

To give some more context, I built a small portfolio review tool using Claude Code – a submission page where you can send Shawn, Kyle, and me your portfolio for an on-air review on YouTube. Of course, we won’t show your name or any personal information. If that’s interesting to you, just click on the link and send us your portfolio!

But getting back to the process, the honest disclosure is that I built it with one of our Mastermind members, who happens to be a literal rocket scientist. And a lot of the actual work was him patiently walking me through what was happening. Without that help, it’s safe to say that I would’ve settled for a tool like Base44.

Yes, you don’t have to code, but you still have to make a ton of decisions that will overwhelm every non-tech-savvy person. You decide between a Python or Node.js backend. You pick a database. You configure the auth. Trust me, it can be confusing.

Base44 takes all of that away. You just give it a prompt, everything else will be handled automatically, and your website will be up and running a few minutes later. I’m not a technical person, but I’ve been exposed to quite a lot of tech and AI in the past years, so I do consider myself above average when it comes to AI (still lightyears behind many Mastermind members, obviously). And even I see why vibecoding tools are so sought after, and I understand why we need them even though Claude Code and Codex can, in theory, do all of that for free.

Now the question is, why Base44? There are plenty of tools out there, and to be clear, there is no moat in this business. Every new feature you introduce will be copied by the competition in no time. The same was true for Wix when it started out.

Wix still succeeded. A huge part of that has been successful marketing. For every dollar Wix spends on marketing, they eventually make 3 to 5 times their money back. That’s a very strong metric.

I recently talked to an entrepreneur who sold his businesses and is now a full-time investor. He said one thing he learned from being a business owner before is that things can be simple and just work. Yes, many small businesses have no moat, and they will never have one. But if we see a company that spends one dollar on marketing and gets five in return, and they do that for many, many years, that might be proof enough that things are working well.

Maor Shlomo said he sold Base44 to Wix because there are two things that can differentiate a tool like Base44 from the competition right now: financial backing and distribution.

Wix can offer both. Over 300 million users right in Base44’s target audience and $600 million in free cash flow to help with financing. Buying Base44 for $80 million only to see it 50x its revenue in 12 months looks like a phenomenal deal (and it is), but part of the truth is that, without Wix, it likely wouldn’t be where it is today.

To give you an example, just 12 weeks after Wix bought Base44, they booked a Super Bowl ad. I joked to Shawn on the podcast that I had to bring it up because he does so every time a company we cover has a Super Bowl ad. But it looks like money very well spent, judging by Base44's growth.

To summarize, Wix is trading at a forward price-to-free-cash-flow of 5x and a forward P/E of 9x. The difference between the two mostly comes from stock-based compensation and deferred revenue. Wix sells annual (multi-year) subscriptions.

So when a small business pays for a year of Wix Premium upfront, Wix gets the cash immediately but only recognizes 1/12 of it as revenue each month over the next year. The other 11/12 sits on the balance sheet as "deferred revenue" until earned. As long as bookings grow, the deferred revenue balance grows, and the change in deferred revenue is a cash inflow that boosts operating cash flow without affecting current-period revenue or earnings.

Stock-based compensation is declining fast, but it’s still 10% of revenue as of today. That said, Wix is buying back a whole lot of shares. Granted, the timing was a bit unfortunate. In late 2025, Wix’s board authorized a $2 billion share repurchase program. To put that into context, at the time, Wix had a market cap of $4 billion, so this was an authorization to buy back half the company.

The buyback was structured as a Dutch auction, and in April, Wix ended up retiring 17.5 million shares for approximately $1.6 billion. The only downside is that just ten weeks later, the stock dropped massively after earnings. The same $1.6 billion would’ve retired more than 50% of the company then.

And yes, earnings reactions are not very predictable. However, given the sentiment around Wix, the release of lower margins due to investments in Base44 being taken negatively couldn’t have been a major surprise to the management team.

Be that as it may, it’s definitely a net positive to retire 30% of the market cap and to see that management thinks Wix’s stock is massively undervalued. I have to bring up to negative points, though.

The first is a somewhat strange $250 million private placement to Henry Ellenbogen’s Durable Capital around the same time as the buybacks. The private placement came at a 5% discount to market with warrants struck at 25% above market and a one-year lockup. Retiring stock at $92 with one hand while issuing stock at a discount with the other is not, on first read, internally coherent.

My only read on this is that Wix might want to prevent activist pressure by placing stock in the hands of a fund they trust. And the dilution effect is minimal compared to the buyback.

The other negative is the low insider ownership. I like buybacks, but if management thinks the stock is massively undervalued, I would like to see them buy it personally as well. Avishai Abrahami, the founder-CEO who has run the company for 20 years, owns roughly 2.8% of the company, with no significant insider buying recently. That’s not a lot.

One last thing before we get to the valuation, you might see about a billion dollars of long-term debt on Wix’s balance sheet. That’s why the Enterprise value numbers don’t look quite as good as market cap-based valuations. However, all the long-term debt is zero-coupon convertibles with conversion strikes well above $200, which means Wix is essentially borrowing for free, and dilution only occurs when Wix’s stock quadruples. I don’t know about you, but I take that.

Alright, let's talk valuation. At $55, the market cap is about $2.3 billion. The balance sheet is (slightly) less pristine than it was a year ago after spending ~$1.6 billion on the April tender, but there are still a few hundred million in cash against $1.15 billion of zero-coupon convertibles and a partially drawn $500 million credit facility – call it roughly $800 million to $1 billion of net debt, which puts enterprise value somewhere around $3.0–3.3 billion.

I'm counting the converts as debt even though they cost nothing in interest and only dilute if the stock more than triples to $210, because the principal still has to be refinanced or repaid in 2030. Against ~$600 million of headline free cash flow, that's about 5x EV/FCF. But against the stricter ~$350-$400 million SBC-adjusted number, it's roughly 8x.

Either way, you're paying a single-digit cash-flow multiple for a profitable, double-digit-growth software business with Base44 thrown in for free. And just for perspective, Base44’s competitors are valued at multi-billion dollar valuations. We looked at quite a lot of SaaS businesses on our show and in this newsletter. But Wix is certainly the cheapest yet.

The other side of it is that Wix has no moat, and its success will depend on execution and on the hope that Base44 will not only keep growing ARR but also achieve margins similar to those of Wix’s legacy business.

I’ll make it short: if we can expect “business as usual” for Wix, it will certainly return 20%+ in the next five years. Business as usual means that Wix’s legacy business will grow revenues at 6-7% while Base44 is growing close to 40% (remember that it grew 50% every 12 weeks in the past!)

I have Base44 reaching 15% margins in 2030. Management said that 2027 should mark the inflection for Base44’s margins and that, at maturity, it should have the same margin profile as the legacy business, which means close to 30%. It’s up to you whether you think 15% in 2030 is realistic based on this.

In the bear case, I expect a significantly more severe downturn in Wix’s core business, and that Base44 won’t be able to fill the gap. Revenues then grow at only 2%, and margins collapse completely. If that’s the case, there is no bottom for Wix stock. You have no physical assets, and I could imagine the cash would be gone along the way, either spent on buybacks or invested in the failing business.

And in a bull case, you assume that Wix keeps cruising like it is right now, while Base44 achieves a 50% annual growth rate over the next 5 years with margins of 20% in 2030.

If I had to assign probabilities to each case, I would assign 40% to the bear case, 40% to the base case, and 20% to the bull case. Highly arbitrary, but it shows the nature of this investment case. There’s a huge potential payout if the market is overreacting and punishing Wix’s business prematurely. And at the same time, this is a company with no hard assets and no margin of safety if the business model is disrupted, and Base44 can’t step in with a similar margin profile.

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