Barclays On GoDaddy: 'It's Grow Time'

In a report published Monday, Barclays analysts initiated coverage of Godaddy Inc GDDY with an Overweight rating and a price target of $32, while expressing confidence in the company's business model, given its "high revenue visibility" and "favorable customer acquisition economics." "In the near term we see potential upside to our EBITDA estimates as the company's faster growing products carry substantially better gross margins, and we expect improvement to the core business as the company leverages its existing infrastructure for future growth," the analysts commented. The size of the worldwide SMB market is estimated to be about 210M organizations, 180M of which are outside the US. Of these, it is estimated that about 70 percent lack a web presence. The analysts estimate GoDaddy's share of the entire revenue opportunity at mid-teens percent, which translates to $11-$16B. In the report Barclays noted, "We expect GDDY to continue growing its customer base at ~10% annually (mid-to-low single digits in the U.S. is bolstered by faster growth internationally) and look for increasing monetization to drive revenue growth ahead of customers as new products are introduced and as SMBs continue to adopt more of the GDDY product portfolio." The analysts believe there is upside to the EBITDA estimates in the near-term, with faster growth products carrying better gross margins and upside from leveraging the existing infrastructure.