GoDaddy a Top Value Play Among Website Builders, Price Target $110: Jefferies

Jefferies said they agree GoDaddy is a top value play among website builders, with consistent execution and healthy cash flow generation after the activist investor Starboard announced that it has purchased a 6.5% stake in a web services firm worth about $800 million.

Starboard in its regulatory filing with the U.S. Securities and Exchange Commission said that the Arizona-based company’s shares were undervalued and represented an attractive investment opportunity.

Following this, GoDaddy’s stock surged as high as 9.6% to an intraday high of $83.29 on Monday.

Analyst Comments

“We agree as our thesis has been on GoDaddy (GDDY) being a top value play among website builders, with consistent execution and healthy cashflow generation. Even after today’s +9% move, valuation EV/FCF 2nd NTM 14.8x is below 3-yr avg 15.9x and at a sharp discount to 3-yr FCF CAGR 18%. FY22 looks set up to benefit from the product innovation delivered throughout FY21,” noted Brent Thill, Equity Analyst at Jefferies.

“We like GoDaddy (GDDY) for its consistent execution, double-digit organic rev growth, strong uFCF generation and attractive valuation (14.8x EV/FCF 2nd NTM vs.18% CAGR thru ’23; EV/S multiple is also a reasonable 3.6x CY23E & 4.1x NTM for a subscription-based model.). Our 12-month price target of $110 (unchanged) is based on EV/FCF 19x.”

GoDaddy Stock Price Forecast

Eight analysts who offered stock ratings for GoDaddy in the last three months forecast the average price in 12 months of $95.63 with a high forecast of $112.00 and a low forecast of $81.00.

The average price target represents a 13.98% change from the last price of $83.90. Of those eight analysts, five rated “Buy”, three rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $81 with a high of $136 under a bull scenario and $46 under the worst-case scenario. The firm gave an “Equal-weight” rating on the internet domain registrar and web hosting company’s stock.

“GoDaddy is a market leader in an underpenetrated SMB Internet infrastructure market. Market growth is supported by a tailwind of growing technology adoption by smaller businesses to develop an online presence. Expansion of the portfolio into horizontal applications to help SMBs and improving attach rates should drive increasing ARPU and retention rates to fuel revenue growth,” noted Elizabeth Elliott, equity analyst at Morgan Stanley.

“Scaled, steady growth and profitability gives us confidence in cash flow growth estimates. We see an acquisition-heavy strategy limiting a re-rating to a mix of software and internet peers, given historically M&A-skewed companies trade at an EV/S and EV/FCF discount to peers.”

Several other analysts have also updated their stock outlook. Citigroup raised the price target to $110 from $105. Truist Securities lifted the target price to $112 from $110. Raymond James cut the target price to $100 from $108. Berenberg upped the price objective to $101 from $99.

Technical analysis also suggests it is good to hold for now as 50-200-day MACD Oscillator and 100-200-day MACD Oscillator signals a mild selling opportunity.

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