Morgan Stanley: Time To Buy GoDaddy

In a report published Monday, Morgan Stanley analysts initiated coverage of

with an Overweight rating and a price target of $29, while expecting the company to generate sustainable revenue growth, margin expansion and FCF growth. In the report Morgan Stanley noted, "GoDaddy established its brand with an aggressive marketing platform that emphasized volume to build brand awareness and drive inbound traffic. The company has turned its focus toward leveraging its brand strength and infrastructure to simplify the increasingly complex process of developing an online presence for SMBs." GoDaddy's scale exceeds that of its peers, which positions that company to offer "a greater breadth of robust products and services" to small enterprises at a lower cost, with "better, integrated features and functionality as SMB adoption of web presence is on the upswing," the analysts said. The company is likely to generate robust cash flow growth, with subscriber and ARPU growth and high quality customer service resulting in low churn and high lifetime customer value. Moreover, the company's scale and low customer acquisition costs result in margin expansion. "We are currently observing a trend of accelerated spend by SMBs as they realize the value of leveraging cloud-based media and applications to give them visibility and scale closer to larger enterprises they compete with. GoDaddy addresses this market with a robust, easy to use, scaled suite of products and services to enable online presence and identity," the analysts wrote.