GoDaddy's Strong Foundation Pleases Analyst, But Shaky Execution Raises Concern

Oppenheimer analyst Ken Wong initiated coverage on GoDaddy Inc GDDY at a Perform rating.

The analyst believed GoDaddy benefits from operating a low-churn, low-maintenance business thanks to its dominant market position in domains (~60% share of .com). 

The analyst also saw its durable core business (domain/hosting/SSL) growing in mid-single-digits (under constrained macro conditions) and expects a return to "average" cohort behavior to push growth above double digits.

The analyst expected GoDaddy to operate with margins at least five points higher as a high-single-digit grower and projects R&D alignment with web/ SMB peers to drive 5ppts of margin.

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

The analyst was concerned about the company's strategy of pursuing higher-value (higher-CAC) customers and preserving the core and expanding margins has impacted the execution.

Consequently, the analyst estimated revenue and adjusted EPS of $4.2 billion and $3.83 in FY23 and $4.5 billion and $5.20 in FY24. 

GDDY Price Action: GoDaddy shares are trading higher by 0.73% at $76.26 on the last check Tuesday. 

Also Read: GoDaddy Launches AI-Powered Instant Video Capabilities

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