RBC Capital Starts GoDaddy Inc (GDDY) at Outperform

RBC Capital initiates coverage on GoDaddy Inc (NYSE: GDDY) with a Outperform rating and a price target of $30.00, saying with 13MM customers, substantial market shares, and consistent growth & profitability, GoDaddy is one of the strongest recent Internet IPOs, fundamentally speaking.

Analyst Mark Mahaney cited the following key investment positives: 1) Large Addressable Market – Almost half a million small businesses are started each month just in the U.S. and more than half of these are not online; 2) Diversified Portfolio of Service Offerings – Domains, hosting & presence, and business applications; 3) Dominant Leadership Position – Based on its substantial revenue base and per our proprietary surveys; 4) Consistent Profitability – With 16%-20% EBITDA margins in 2012, 2013, and 2014, and a subscription model that should enable further margin expansion through scale; & 5) Several New Growth Opportunities – International expansion, more solutions for Web Pros, and ARPU drivers in the company’s core domains segment with the new gTLD market and an emerging secondary market.

Meanwhile, he cited the following key investment risks: 1) Challenges Associated With A Small Business Customer Base – Endemically high churn rates – 15%; 2) Significant Competition – In each of the company’s business segments from both private and public companies; 3) Google Ecosystem Risk – Google is a material driver of traffic to GoDaddy and has a domains service in beta; & 4) Financial Leverage – Post the IPO, GDDY still carries a $1.1B term loan.

For an analyst ratings summary and ratings history on GoDaddy Inc click here. For more ratings news on GoDaddy Inc click here.

Shares of GoDaddy Inc closed at $24.88 yesterday.

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