GoDaddy's Domain Business Holds The Gold Standard, This Analyst Believes

RBC Capital Markets analyst Brad Erickson initiated coverage on GoDaddy Inc GDDY at Sector Perform rating with a price target of $80.
The analyst believes the company's domain & hosting business is 'the gold standard' for B2B business branding amid a fairly commoditized market.
Erickson is bullish on GDDY's core business as he sees it as a mid-single-digit growth provider & cash machine and cites the buyback program as positive.
The analyst believes the company should invest more in product development to create value from its e-commerce/website-building capabilities.
With 85% of GDDY's revenues being of recurring nature, the analyst expects FCF margins to exceed the mid-twenties by next year.
However, Erickson sees GDDY's lower-quality, tough-to-use GUI along with the absence of scalability and templated APIs, as a matter of concern and reason for lagging behind its peers.
Nevertheless, the analyst expects 5% and 7% growth in 2023 and 2024, respectively, with a projected 117 bps/137 bps of EBITDA/FCF margin leverage in 2023.
Erickson expects the majority of growth from the Applications + Commerce business, with the Core business witnessing low-single-digits growth in 2023 and modest acceleration into 2024.
Also Read: What's Going On With GoDaddy Shares
Price Action: GDDY shares are trading lower by 3.29% at $73.24 on the last check Monday.