Is GoDaddy Stock a smart addition to your portfolio?

Hosting, e-commerce and application services provider GoDaddy Inc. (NYSE: GDDY) the company’s stock recently hit an all-time high in anticipation of its addition to the S 500 Index on June 24, 2024. The company has added artificial intelligence (AI) tools under AiRO that can automate website design and functionality in a seamless and user-friendly way. AiRO was designed to help customers simplify and streamline the processes of building and managing their online presence.

For example, AiRO can suggest domain names based on your project or company description, check availability, create digital ads, and suggest personalized targeting and budgeting to address your goals and objectives.

GoDaddy operates in the computer and technology sector, competing with e-commerce enablers such as Wix.com Ltd. (NASDAQ: WIX), Shopify Inc. (NYSE: SHOP)AND Etsy Inc. (NASDAQ: ETSY).

GoDaddy: Your one-stop shop for website and e-commerce tools

GoDaddy has been a leader in internet domain registration and hosting for over a decade. Its services currently include website design, construction, optimization, domain valuation, auctions, parking, sales and storefront marketing tools, supporting small business digitalization and e-commerce.

The company has demonstrated high levels of customer retention, with a customer retention rate of 85%, increasing to 92% for customers who have been with the company for over 3 years. The addition of AI tools has boosted the company’s stock appreciation after years of swings between $88 and $68.

Third-party service providers take their piece of the GoDaddy pie

It is important to note that GoDaddy sources third-party services, which increases its variable cost structure. For example, it obtains domain registration services from VeriSign Inc. (NASDAQ: VRSN)hosting services from Amazon.com Inc. (NASDAQ: AMZN)AWS and various productivity tools from Microsoft Co. (NASDAQ: MSFT). GoDaddy must pay all third-party vendors, which reduces gross margin. The company combines revenue with additional services to grow to 21 million users spanning 85 million domains and generating an average revenue per user (ARPU) of $206.

GDDY shares are consolidating in a rectangular channel

The daily candlestick chart for GDDY shows that it is trading in a square channel formation since May 20, 2024. The channel consists of upper trendline resistance at $140.82 and lower trendline support at $136.87. GDDY attempted a breakout from the high to new highs at $142.55, but the stock immediately fell to the lower trendline when it was unable to sustain the breakout. The daily relative strength index (RSI) is drifting down to band 53 after rejecting the overbought band 70. Pullback support levels are $131.84, $127.15, $120.59 and $115.28.

GoDaddy Beats Q1 2024 EPS Estimates

On May 2, 2024, GoDaddy reported Q1 2024 EPS of $2.76, beating the 95 consensus estimate by $1.80. Revenue rose 7% year-over-year to $1.11 billion, beating the consensus estimate by $11.7 million.

GoDaddy revenue growth by segment

Apps and Commerce (A) revenue increased 13% year-over-year to $383.1 million. Company A’s annual recurring revenue (ARR) increased 13% year-over-year to $1.5 billion. Core Platform revenue increased 4% YoY to $725.4 million. Core ARR at 3% YoY to $2.3 billion. Total bookings increased 9% year-over-year to $1.3 billion. Net profit increased 747% to $401.5 million, representing a margin of 36%. However, the company recognized a one-time tax benefit of $258 million related to deferred tax assets and loss carryforwards.

GoDaddy provides real-time guidance

The company issued second-quarter 2024 revenue guidance of $1.10 billion to $1.12 billion, compared to the consensus estimate of $1.11 billion. GoDaddy expects full-year 2024 revenue of $4.50 billion to $4.56 billion, compared to consensus estimates of $4.52 billion. Normalized EBITDA margin is expected to be approximately 31%.

GoDaddy CEO Aman Bhutani commented: “We are off to a great start in 2024 and are excited to build on this momentum as we advance our mission to empower entrepreneurs around the world and create more inclusive opportunities for all.” He continued: “With a dedicated team and focus on our key initiatives and innovations, we are driving profitable growth that maximizes free cash flow while delivering truly magical experiences for our customers.”

GoDaddy Analyst Ratings and Price Targets are on MarketBeat. Analysts have a price target of $149.92, or 9% for GDDY.

Source: MarketBeat