JMP Says GoDaddy Now Worth $30/Share

In a report published Monday, JMP Securities analysts initiated coverage of Godaddy Inc GDDY with a Market Outperform rating and a price target of $30.

GoDaddy is the global leader in domain registration and website services, with 13+ million SMB customers globally generating an expected $1.9 billion in bookings, ~$1.6 billion in revenue, $320 million in EBITDA (20% margin), and $250 million in FCF for 2015.

In the report JMP Securities noted the three "key points" on which the positive view on GoDaddy is based:

• Product mix-shift as the company offers a full suite of tools for SMBs to create, run, and manage their business
• This results in higher-margin revenue and expanding margins
• Strong underlying fundamentals with a seasoned management team, high visibility into revenue given its subscription model, and strong FCF generation

The company is aggressively expanding beyond its core domain business. The analysts believe that the expanded focus is directly related to GoDaddy’s relatively new management team and the company is "building its product suite organically, through partnerships, and via acquisitions."

GoDaddy's gross margins have expanded from 53 percent in 2012 to 64 percent in 2015. The analysts expect Hosting and Biz Apps revenue to contribute a little under 50 percent of total revenue in 2015, as compared to 35 percent in 2012. "High cohort retention rates lead to significant revenue visibility," the analysts added.