GDDY: Is GoDaddy a Buy in 2021?

GoDaddy Inc. (GDDY) is one of the largest services platforms for entrepreneurs worldwide. It has gained 39.8% over the past year on increased demand for its services. These services include providing domain names and shared website hosting products that enable consumers to build websites and e-commerce enabled online stores. Through its services, GDDY empowers more than 20 million entrepreneurs every day.

The company’s impressive performance is reflected in its solid financial results in the last-reported quarter (ended December 31, 2020). The stock closed Friday’s trading session at $72.41.

Furthermore, its acquisition of Poynt, a mobile local search and advertising company, is expected to be quite profitable. As more companies turn to GDDY to create and expand their online presence, we think the company should thrive.

Here are the factors that I think could influence GDDY’s performance in the upcoming months:

Acquisition of Poynt

In December, GDDY entered an agreement to acquire Poynt, which it completed in February. The acquisition is expected to be very profitable and should help expand the company’s offerings and give it an edge over its competitors, such as Shopify Inc. (SHOP). GDDY’s CEO Aman Bhutani said that, “Poynt delivers amazing experiences in payments, invoicing and point-of-sale that strengthen our commerce offerings and will bring significant value to our customers.”

Increase in Revenue Across All Segments

GDDY’s total revenue increased nearly 12% year-over-year to $873.90 million for the fiscal 2020 fourth quarter ended December 31, 2020. Its revenue from its domain segment increased 14.2% year-over-year to $402.20 million for the quarter, while revenue from the hosting and presence segment increased 5.5% year-over-year to $308.80 million. Its revenue from the business applications segment increased 20.4% year-over-year.

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Its net income increased 16.5% year-over-year to $70.50 million for the fourth quarter, while its EPS increased 20.6% year-over-year to $0.41.

Favorable Analyst Estimates

Analysts expect GDDY’s revenues to increase 11.7% in fiscal 2021 and 10.2% in fiscal 2022. Its EPS is expected to grow 33.3% for the current quarter, ending March 31, 2021, 153.4% in fiscal 2021 and at a rate of 80% per annum over the next five years.

Wall Street analysts expect the stock to hit $96.71 in the near term, which indicates a potential upside of 19%.

POWR Ratings Show Promise

GDDY has an overall rating of B, which equates to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. GDDY also has a B grade for Quality, which is in sync with its trailing-12-month gross profit margin of 65.1%, which is higher than the industry average 48.4%.

The stock’s 13.7% gains over the past three years and 39.8% gains over the past year has helped it secure a B grade for Momentum also.

We have also graded GDDY for Growth, Value, Stability and Sentiment. Get all GDDY’s ratings here.

GDDY is ranked #9 of 44 stocks in the Internet – Services industry.

Click here to access 10 other top-rated stocks in the same industry.

Bottom Line

As the COVID-19 pandemic-driven remote lifestyle is expected to continue even in the post-pandemic environment, several businesses have been creating or improving their online presence to attract consumers. GDDY is well-positioned to gain from this trend and we expect it to witness increasing demand for its services in the upcoming months.

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GDDY shares were trading at $73.27 per share on Monday afternoon, up $0.86 (+1.19%). Year-to-date, GDDY has declined -11.67%, versus a 5.26% rise in the benchmark S&P 500 index during the same period.

About the Author: Manisha Chatterjee

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...