Why GoDaddy's 2024 Margin Expectations Are Undervalued: Analyst Revises Price Target

B. Riley Securities analyst Naved Khan reiterated a Buy rating on GoDaddy Inc. GDDY, raising the price target to $107 from $102.

Khan is incrementally positive on GDDY, as the current Street expectations for 2024 EBITDA margin (26.5%) are arguably too low, with management reiterating 28% as a "floor" for margin next year.

The analyst is also bullish on the prospects of a pickup in revenue growth and its sustainability, given the strength in underlying drivers (gross ads, product attachment).

In addition, Khan adds that the rollout of price increases, easing FX headwinds, and aftermarket growth comps should drive healthy top-line growth going ahead. 

The analyst raised the price target to reflect a 28% normalized EBITDA (NEBITDA) margin in 2024. 

Also Read: GoDaddy Launches AI-Powered Instant Video Capabilities

The analyst applauds the company's strength in the Payments section, with GPV on track to more than double by year-end. 

Khan thinks that a growing adoption by existing customers is contributing meaningfully to growth and continues to represent the most significant growth opportunity, given GDDY's large base of 21 million customers. 

In addition to this, adoption with new customers remains very strong. Payable domains continue to see robust growth, with the company's ability to test and innovate helping drive adoption, the analyst adds.

After facing headwinds in 1H23 from FX, tough Aftermarket comps, and migration/sale of legacy brands, GDDY expects to see growth rising from ~3% currently to 7% by YE, benefiting from easier comps, price increases along with continuing strength in gross adds and product attach rates, mentions Khan. 

He believes 2024 could see further pickup from layering-in of price hikes and lapping the effects of migration/sale of legacy brand assets. 

The analyst raised FY23 EPS estimate to $2.57 from $2.54. FY23 revenue estimates stand at $4.257 billion.

Price Action: GDDY shares are trading higher by 0.68% to $75.15 on the last check Wednesday.