On Wednesday, Barclays adjusted its outlook on GoDaddy Inc (NYSE:GDDY), a well-known internet domain registrar and web hosting company. The firm increased the price target to $185 from the previous $165 while keeping an Overweight rating on the stock.
The revision reflects an in-depth analysis of GoDaddy's revenue sub-segments, which provided insights into the company's core operations and subscription services. Barclays highlighted the importance of GoDaddy's primary and aftermarket domain businesses, which account for about 37% and 10% of revenue, respectively. Despite their lower gross margins compared to the company's overall profile, these segments are considered fundamental to GoDaddy's performance.
The firm also noted that keeping up with the approximately 7% annual price increases of competitor VeriSign (NASDAQ:VRSN) is crucial for GoDaddy's core domain services. According to the analyst, while the current gross margin (GM) analysis does not alter the immediate perspective on GoDaddy's stock, the potential for a favorable mix shift in the company's GM profile over the coming years should be of interest to investors.
Barclays anticipates that GoDaddy's gross margin will remain stable in the near future, aligning with the management's commentary. The analyst's assessment is that the mix of gross margin could become a more significant part of GoDaddy's narrative in the long term, suggesting a strategic area for the company to focus on for growth.
GoDaddy's financial stability and the potential for a shift in revenue mix could be key factors in the company's future performance. The price target increase by Barclays signals confidence in GoDaddy's ability to maintain its market position and possibly enhance profitability through strategic management of its service mix.
In other recent news, GoDaddy Inc. reported a 7% increase in total revenue for Q2, reaching $1.1 billion, with a notable 15% growth in the Applications and Commerce segment. This strong performance has prompted the company to raise its full-year revenue guidance. The company's CEO disclosed that year-over-year bookings growth for applications and commerce in the second half of the year is projected to face approximately 5% tougher comparisons than in the first half.
Baird reasserted its positive stance on GoDaddy, maintaining an Outperform rating and a $190.00 price target for the company's stock. Analyst firm Cantor Fitzgerald initiated coverage with a Neutral rating and a price target of $170, citing expected sustained benefits from the company's strategies and AI-driven monetization efforts. Benchmark raised its price target from $170 to $186, maintaining a Buy rating, influenced by GoDaddy's Free Cash Flow per Share Compound Annual Growth Rate target for the years 2024 to 2026.
RBC Capital Markets increased its price target from $145 to $175, maintaining an Outperform rating, following GoDaddy's strong Q2 performance. Despite carrying a net debt of $3.4 billion, GoDaddy remains committed to its AI initiatives, including GoDaddy Airo and GABI, a customer service tool.
InvestingPro Insights
As GoDaddy Inc (NYSE:GDDY) continues to capture the attention of investors and analysts alike, real-time data from InvestingPro offers additional insights into the company's financial health and market performance. The company boasts a robust market capitalization of $22.27 billion, reflecting its significant presence in the web services industry. Despite expectations of a net income drop this year, GoDaddy's revenue has shown a healthy growth rate of 5.91% over the last twelve months as of Q2 2024, with quarterly revenue growth even higher at 7.29% for the same period. This indicates that the company is not only maintaining its revenue streams but also expanding them.
InvestingPro Tips highlight that GoDaddy has been trading at a high EBITDA valuation multiple and near its 52-week high, with a price that's 94.11% of this peak. This could signal market optimism about the company's financial prospects and its strategic positioning. However, with a high Price / Book multiple of 141.66, investors are paying a premium for the company's book value, which could be a point of consideration for those looking at the fundamentals. Additionally, GoDaddy's management has been actively buying back shares, a move that often reflects leadership's confidence in the company's future and can be a positive sign for investors. With 15 additional InvestingPro Tips available, those interested in a deeper dive can explore further nuanced analysis of GoDaddy's financials and market trends.
The insights provided by InvestingPro, combined with the latest price target adjustment from Barclays, suggest that GoDaddy is poised to continue its trajectory in the web services space. Investors may find these additional data points useful when assessing the company's stock for their portfolios.
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