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GoDaddy (GDDY): One of This Year's Most Overlooked Stocks
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“Every morning brings new potential, but if you dwell on the misfortunes of the day before, you tend to overlook tremendous opportunities.” – Harvey Mackay
Every year, many stocks outperform the market. It’s easy to spot the high-flying tech stocks that are constantly hyped up by the financial media. It’s much more difficult to identify stocks that beat the market but also fly under the radar.
Investors tend to overlook these companies because they’re not necessarily flashy or making news headlines. Spotting these breakout leaders early can be extremely rewarding, and that’s exactly what we’ve seen this year with one standout software company.
After multiple years of sideways action, GoDaddy – a developer of cloud-based products in the United States (and more generally recognized for providing domain name registry services) – has seen its stock soar in 2024 amid an enticing product portfolio and an expanding global footprint.
The Zacks Rundown
GoDaddy (GDDY - Free Report) , a Zacks Rank #2 (Buy) stock, is part of the Zacks Internet – Delivery Services industry group. This industry has been handily outpacing the market this year by a wide margin. In fact, stocks in this industry have risen an average of 38.3% this year:
Image Source: Zacks Investment Research
This group is also showing favorable earnings metrics as we can see below:
Image Source: Zacks Investment Research
Historical research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1.
It’s no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within top-ranked industries, we can dramatically improve our stock-picking success.
GoDaddy’s Mounting Presence and Robust Product Portfolio
GoDaddy has a large and growing customer base with consistent revenue and bookings growth. Over the five years ending December 31, 2023, GoDaddy maintained a customer retention rate of about 85%.
For customers who had been with GoDaddy for over three years, the retention rate was around 92%. Additionally, the average revenue per user increased by 3% to $203 last year, with GoDaddy adding 100,000 new customers. The additions were mostly small and medium-sized businesses that pay annual fees for domain registration and other online services like web hosting.
GoDaddy's future looks promising due to its expanding portfolio. In 2023, the company launched GoDaddy Airo in the U.S., an AI-driven tool designed to save customers time by providing personalized website content, logos, domain-based email, social media posts, marketing calendars, and email communications.
The introduction of new generative AI capabilities has further enhanced customer experience and increased spending on the platform. Last year alone, over 1.5 million customers spent more than $500 annually on GoDaddy’s products. The integration of GoDaddy Conversations with Google's Business Messages allowed users of the Websites and Marketing plans feature to receive messages from customers through Google Search and Maps.
GoDaddy's international presence is growing, with 48% of its customers based outside the U.S., including in Canada, India, Australia, and the UK. The company is investing in technology, marketing, data centers, and customer support to further expand its global reach.
Current Trends and Forward Guidance
By the end of the second quarter of 2024, GoDaddy had $445 million in cash and total liquidity of $1.4 billion, with net debt of $3.4 billion and a net leverage ratio of 2.4 times on a trailing twelve-month basis. In January 2024, GoDaddy refinanced $1.8 billion in debt, securing a 50-basis point reduction in interest rates.
The strong liquidity position has enabled the company to actively repurchase shares, with $3.1 billion worth of shares bought back, totaling 38.3 million shares. There is $915 million remaining under the current share repurchase authorization.
The software company has put together an impressive earnings history, surpassing earnings estimates in each of the past five quarters. Earlier in August, GoDaddy reported second-quarter earnings of $1.10/share, a 2.8% surprise over the $1.07/share consensus estimate. GoDaddy has delivered a trailing four-quarter average earnings surprise of 10.3%.
GDDY shares received a boost as analysts covering the company have been increasing their Q3 earnings estimates lately. Third-quarter earnings estimates have risen 0.81% in the past 60 days. The Zacks Consensus EPS Estimate now stands at $1.25/share, reflecting a staggering potential growth rate of 40.5% relative to the year-ago period.
Image Source: Zacks Investment Research
For the third quarter of 2024, GoDaddy expects revenues in a range of $1.13-$1.15 billion, indicating year-over-year growth of 7% at the mid-point.
GDDY Stock Performance in 2024
Looking at the yearly chart of this stock, you wouldn’t even know that the broader market just went through a correction. Stocks that hold up well through volatility tend to lead during the next leg up. And that’s exactly what we’ve seen with GoDaddy stock:
Image Source: StockCharts
Shares sidestepped the recent pullback with ease and have now advanced more than 53% year-to-date. Only stocks that are in very powerful uptrends are able to make this type of move and experience such massive outperformance.
The stock remains above upward-trending technical levels in the 50-day (blue line) and 200-day (red line) moving averages. Note that the 50-day average has acted as key support throughout the bullish move.
Bottom Line
GoDaddy has illustrated its ability to evolve, adding new and exciting AI features that are translating to a growing customer base and increased bookings. A budding international presence is another key catalyst.
Backed by a strong industry group and impressive history of earnings beats, it’s not difficult to see why this company is a compelling investment. Robust fundamentals combined with an appealing technical trend certainly warrant a closer look. The future looks bright for this highly-ranked, leading stock.
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GoDaddy (GDDY): One of This Year's Most Overlooked Stocks
“Every morning brings new potential, but if you dwell on the misfortunes of the day before, you tend to overlook tremendous opportunities.” – Harvey Mackay
Every year, many stocks outperform the market. It’s easy to spot the high-flying tech stocks that are constantly hyped up by the financial media. It’s much more difficult to identify stocks that beat the market but also fly under the radar.
Investors tend to overlook these companies because they’re not necessarily flashy or making news headlines. Spotting these breakout leaders early can be extremely rewarding, and that’s exactly what we’ve seen this year with one standout software company.
After multiple years of sideways action, GoDaddy – a developer of cloud-based products in the United States (and more generally recognized for providing domain name registry services) – has seen its stock soar in 2024 amid an enticing product portfolio and an expanding global footprint.
The Zacks Rundown
GoDaddy (GDDY - Free Report) , a Zacks Rank #2 (Buy) stock, is part of the Zacks Internet – Delivery Services industry group. This industry has been handily outpacing the market this year by a wide margin. In fact, stocks in this industry have risen an average of 38.3% this year:
Image Source: Zacks Investment Research
This group is also showing favorable earnings metrics as we can see below:
Image Source: Zacks Investment Research
Historical research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1.
It’s no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within top-ranked industries, we can dramatically improve our stock-picking success.
GoDaddy’s Mounting Presence and Robust Product Portfolio
GoDaddy has a large and growing customer base with consistent revenue and bookings growth. Over the five years ending December 31, 2023, GoDaddy maintained a customer retention rate of about 85%.
For customers who had been with GoDaddy for over three years, the retention rate was around 92%. Additionally, the average revenue per user increased by 3% to $203 last year, with GoDaddy adding 100,000 new customers. The additions were mostly small and medium-sized businesses that pay annual fees for domain registration and other online services like web hosting.
GoDaddy's future looks promising due to its expanding portfolio. In 2023, the company launched GoDaddy Airo in the U.S., an AI-driven tool designed to save customers time by providing personalized website content, logos, domain-based email, social media posts, marketing calendars, and email communications.
The introduction of new generative AI capabilities has further enhanced customer experience and increased spending on the platform. Last year alone, over 1.5 million customers spent more than $500 annually on GoDaddy’s products. The integration of GoDaddy Conversations with Google's Business Messages allowed users of the Websites and Marketing plans feature to receive messages from customers through Google Search and Maps.
GoDaddy's international presence is growing, with 48% of its customers based outside the U.S., including in Canada, India, Australia, and the UK. The company is investing in technology, marketing, data centers, and customer support to further expand its global reach.
Current Trends and Forward Guidance
By the end of the second quarter of 2024, GoDaddy had $445 million in cash and total liquidity of $1.4 billion, with net debt of $3.4 billion and a net leverage ratio of 2.4 times on a trailing twelve-month basis. In January 2024, GoDaddy refinanced $1.8 billion in debt, securing a 50-basis point reduction in interest rates.
The strong liquidity position has enabled the company to actively repurchase shares, with $3.1 billion worth of shares bought back, totaling 38.3 million shares. There is $915 million remaining under the current share repurchase authorization.
The software company has put together an impressive earnings history, surpassing earnings estimates in each of the past five quarters. Earlier in August, GoDaddy reported second-quarter earnings of $1.10/share, a 2.8% surprise over the $1.07/share consensus estimate. GoDaddy has delivered a trailing four-quarter average earnings surprise of 10.3%.
GDDY shares received a boost as analysts covering the company have been increasing their Q3 earnings estimates lately. Third-quarter earnings estimates have risen 0.81% in the past 60 days. The Zacks Consensus EPS Estimate now stands at $1.25/share, reflecting a staggering potential growth rate of 40.5% relative to the year-ago period.
Image Source: Zacks Investment Research
For the third quarter of 2024, GoDaddy expects revenues in a range of $1.13-$1.15 billion, indicating year-over-year growth of 7% at the mid-point.
GDDY Stock Performance in 2024
Looking at the yearly chart of this stock, you wouldn’t even know that the broader market just went through a correction. Stocks that hold up well through volatility tend to lead during the next leg up. And that’s exactly what we’ve seen with GoDaddy stock:
Image Source: StockCharts
Shares sidestepped the recent pullback with ease and have now advanced more than 53% year-to-date. Only stocks that are in very powerful uptrends are able to make this type of move and experience such massive outperformance.
The stock remains above upward-trending technical levels in the 50-day (blue line) and 200-day (red line) moving averages. Note that the 50-day average has acted as key support throughout the bullish move.
Bottom Line
GoDaddy has illustrated its ability to evolve, adding new and exciting AI features that are translating to a growing customer base and increased bookings. A budding international presence is another key catalyst.
Backed by a strong industry group and impressive history of earnings beats, it’s not difficult to see why this company is a compelling investment. Robust fundamentals combined with an appealing technical trend certainly warrant a closer look. The future looks bright for this highly-ranked, leading stock.