RBC Capital Markets issued a company note on Web.com Group Inc. WWWW, downgrading the company from Outperform to Sector Perform with a $20 price target.
Analysts Rohit Kulkarni and Mark Mahaney wrote, “The company operates in a highly fragmented market and offers one of the most comprehensive packages of services in the space. However, WWWW is working through a variety of issues which have impacted ARPU and Revenue growth over the past 6-9 months. We would want to see stabilization & growth in ARPU, clear signs of consistent execution in DIY/DIWM offerings, and stable marketing spend in order to be more constructive. At current levels, we believe the shares are roughly fairly priced.”
Related Link: This Analysts Sees Potential Threat To Web.com From Godaddy's IPO
Web.com has reported multiple quarters of revenue and earnings misses. This can be partly attributed to a $20 million revenue impact after exiting the National Accounts business and a $10 million loss in revenue from softness in premium domains. RBC believes that an increase in marketing by competitors will further erode Web.com’s market share.
Furthermore, analysts believe that there may be a growing consumer adoption of self service Do-it-yourself website creation tools which will hurt the company’s core business platform.
Shares of Web.com recently traded at $18.56, down 5.1 percent.
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