GoDaddy Will Hit 2016 Forecasts, Don't Doubt It: Citi

In a report published Thursday, Citi analysts Mark May and Ryan Ripp reiterate a Buy rating and $32.00 price target on shares of Godaddy Inc GDDY. They note that, after stress testing their model, they have arrived to the conclusion that 2016 forecasts seem reasonable, or even conservative.

In fact, the firm’s analysis of customer retention trends (churn), new client growth, customer acquisition cost trends, and average bookings per customer trends suggests there could be up to 8 percent upside to the consensus estimate for EBITDA in 2016. Moreover, the tests indicate retention is still high, churn remains low, and CAC in the mid-to-high $50 range.

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Furthermore, the analysis suggests that Citi’s 2016 revenue and bookings forecasts seem achievable even allowing for 1) higher CAC; 2) a surge in churn; and 3) a deceleration of more than 200bps in the rise of average bookings per customer, even in spite of FX headwinds, which are likely to abate next year. Moreover, they note that, “if recent trends hold, consensus CY16 revenue and EBITDA estimates could be as much as 4% and 8% too low, respectively.”

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May and Ripp are now modeling earnings of $1.33 per share for 2015, earnings of $1.37 per share for 2016, and earnings of $1.72 per share for 2017. For the upcoming quarter, earnings are expected to come in at $0.34 per share, considerably above the Street’s consensus.

Shares of Godaddy are up more than 4 percent on Thursday trading.