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GoDaddy Initiated at Craig-Hallum

April 28, 2015 1:25 pm
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Craig-Hallum initiated coverage on Godaddy Inc (NYSE: GDDY) Monday with a Buy rating and $30 price target.

Analysts Mitchell Bartlett and George A. Kelly felt that GoDaddy was a leader in the rapidly growing web services industry.

The analysts expected a multi-year period of 12 percent to 15 percent organic growth with the potential for growth to accelerate “as the company shifts focus to international markets and higher-end business applications.”

“The race is on among a handful of well-funded players that have emerged over the past several years. We see the winners ultimately having tens of millions of worldwide subscribers, delivering a range of valuable services to this hard to reach audience,” according to the analysts.

The analysts noted that domains had been a large part of the company’s business, however, margins were expected to benefit from growth in the non-domain areas of the business.

Bartlett felt that two business models had emerged. One model delivering “large sales and customer service platforms with broad product portfolios catering to a range of customer needs,” such as GoDaddy, and the other was a “smaller, more focused companies primarily offering DIY website builders to SMBs and consumers looking for the internet equivalent of the yellow pages.”

The analysts concluded that “GoDaddy’s absolute size, brand recognition and rapid international expansion make it a clear long term winner.”

The $30 price target was based on 16.5x the firm’s 2016 EBITDA estimate of $360 million.

The analysts pointed out that other internet category leaders had a lower growth rate than GoDaddy, however, they carried a premium multiple of 19x 2016 EBITDA.

Godaddy Inc closed at $26.16 Monday, up 2.07 percent.

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