GoDaddy (GDDY) Down 22.5% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for GoDaddy (GDDY). Shares have lost about 22.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is GoDaddy due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

GoDaddy Q4 Earnings Miss Estimates, Revenues Beat

GoDaddy Inc. reported fourth-quarter 2019 adjusted earnings of 34 cents per share, missing the Zacks Consensus Estimate of 37 cents. Also, the bottom line was up 21.4% from the year-ago quarter.

The company generated revenues of $780.4 million, up 12.2% year over year or 13% on a constant-currency basis. The reported figure surpassed the Zacks Consensus Estimate by 0.4%.

The revenue growth was driven by strong performance of its product segments on a year-over-year basis. Also, the increase in revenue per user aided growth.

International revenues were $261.4 million in the fourth quarter, up 8.8% year over year or approximately 11.2% on a constant-currency basis.

Segmental Revenues

GoDaddy generates revenues from three segments — Domain, Hosting and Presence, & Business Applications.

Domain: The company generated revenues of $352.3million (45% of total revenues) from this segment. The figure improved 12.1% from the year-ago quarter, driven by strong liquid domain aftermarket and renewals.

Hosting and Presence: This segment generated revenues of $292.8 million (38% of revenues), increasing 8.4% on a year-over-year basis. The revenue growth can be primarily attributed to robust feature engagements, bookings and appointments within this segment. Further, the well-performing GoCentral remained a major positive.

Business Applications: Revenues from this segment came in at $135.3 million (17% of revenues), increasing 21.3% year over year.

Operating Metrics

The company’s customer base reached 19.3 million at the end of the fourth quarter. Notably, the figure was up 4.1% from the prior-year quarter. Growing website adoption in emerging markets aided the growth of its customer base. Average revenue per user was $158 in the reported quarter, up 6.6% on a year-over-year basis, attributable to solid momentum across international markets served by the company.

GoDaddy uses total bookings as a performance measure, since payment is usually collected at the time of sale, and recognizes revenues ratably over the term of customer contracts. In the fourth quarter, total bookings of $833.6 million increased 13.8% year over year or 14.1% on a constant-currency basis.

Operating Results

Gross margin was 65.3%, down 160 basis points from the prior-year quarter.

Operating expenses (technology and development, marketing and advertising, & general and administrative) of $302.5 million increased 7.7% year over year.

Balance Sheet & Cash Flow

At the end of the fourth quarter, total cash and cash equivalents, along with short-term investments were $1.09 billion compared with $990.2 million in third-quarter 2019. Accounts and other receivables were $30.2 million compared with $29 million in the third quarter.

Long-term debt was $18.4 billion at the end of the fourth quarter.

Net cash provided by operating activities was $162.2 million compared with $200.2 million in the third quarter. Capital expenditure was $16.5 million at the end of fourth quarter.

Additionally, adjusted free cash flow was $177.7 million during the reported quarter.

Guidance

For full-year 2020, management expects revenues to be $3.315 billion, indicating year-over-year growth of 11%.

Additionally, free cash flow in 2019 is projected at $835 million, suggesting year-over-year growth of 14%.

How Have Estimates Been Moving Since Then?

Estimates review followed an upward path over the past two months. The consensus estimate has shifted 6.83% due to these changes.

VGM Scores

At this time, GoDaddy has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

GoDaddy has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.