UPDATE: Credit Suisse Initiates Coverage on Endurance International Group on Stable and Recurring Subscription with High FCF Generation

In a report published Tuesday, Credit Suisse analyst Stephen Ju initiated coverage on

with an Outperform rating and $23.00 price target. In the report, Credit Suisse noted, “Due to the ease of product discovery, an online presence is an indispensable tool contributing to lead generation for SMBs. This product necessity as well as the subscription-driven billing model provides Endurance with not only a stable, recurring revenue source but also a negative cash conversion cycle. This drives unlevered free cash flow margins to 34% while experiencing monthly subscriber revenue churn of ~1%. Large Addressable Market Domestically and Internationally: EIGI's addressable market is about 26m SMBs domestically and an additional 50m internationally. As the majority of these SMBs are yet to be online, this represents an underserved group awaiting Web- and cloud-based solutions. Margin Expansion via ARPS Growth: With newer subscribers starting at under ~$10/month, EIGI will look to move ARPS higher through the upsell of value-add services; current ARPS stands at ~$13. Valuation: Our $23 target price is based on DCF, which uses a 12.0% weighted average cost of capital and a 3% terminal growth rate. Our long-term (2014-2019) growth projections for Endurance International Group Holdings, Inc., for revenue, adj. EBITDA, and adj. EPS are 14.1%, 17.8%, and 19.4%, respectively.” Endurance International Group Holdings closed on Monday at $11.86.