Market Overview

Goldman Sachs: One Stock To Buy, One To Sell And One To Hold In Content Management

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Goldman Sachs: One Stock To Buy, One To Sell And One To Hold In Content Management

The content management space has an immediately addressable market size of $18 billion, Goldman Sachs said in an industrywide report. When tangential product offerings are included, the market size swells to $150 billion.

The Analyst

Goldman Sachs' Mark Grant and Heath Terry initiated coverage of the following names:

Godaddy Inc (NYSE: GDDY) initiated with a Buy, $81 price target.

  • Wix.com Ltd (NASDAQ: WIX) initiated with a Neutral, $93 price target.
  • Endurance International Group Hldgs Inc (NASDAQ: EIGI) initiated with a Sell, $8.50 price target.

Godaddy

Godaddy boasts the strongest overall fundamental position within the content management group, the analysts said. Godaddy can claim the following, according to Goldman Sachs:

The greatest scale, with 17 million paying subscribers versus Wix's 3.2 million and Endurance's 5 million.

Superior FCF generation at $628 million versus Wix's $100 million and Endurance's $256 million.

A disciplined leverage.

Superior positioning to acquire customers.

A ramping average revenue per user.

Expectations for ongoing operating leverage and continued free cash flow generation.

Godaddy's product portfolio line is considered to be the most robust and holistic among its peers, according to Goldman Sachs. 

Related Link: GoDaddy Surges On Strong Guidance, 216K More Net Customers

Wix: Valuation Concerns

Israel-based Wix began offering a premium subscription for its website creation platform in 2008 and has introduced multiple offerings and updates since then, the analysts said. This led the company to report 40 percent or more collections growth in each of the past three years, given the company's "strong product innovation and efficient marketing."

Wix shares are trading at an enterprise value of around 8x 2018E sales and 45x 2018E free cash flow, according to Goldman Sachs. At these levels, "much of the optimism" is already priced into the stock, the analysts said.

"We would become more constructive on Wix if we begin to see signs of code adoption beyond what our estimates imply or see acceleration in collections without a commensurate increae in customer acquisition costs, as we believe its multiples could expand above current levels." 

Endurance International: Work To Be Done

Endurance International's appointment of Jeffrey Fox as CEO was encouraging, and recent moves to consolidate its brands, harvest legacy offerings and invest in growth are encouraging, the analysts said. It will take multiple quarters before the company can see positive subscriber and revenue growth once again, according to Goldman Sachs. Accordingly, investors shouldn't expect to see multiple expansion in the stock or the Street estimates moving higher. 

Endurance International's "elevated" financial leverage represents a headwind to its growth profile in light of the company's reputation of growing revenue through M&A deals, the analysts said. 

The web hosting platform can improve its brand value and execution over the medium- to long-term with the right focus, according to Goldman Sachs — but in the near-term, there are better opportunities elsewhere for investors.

Price Action

Shares of Godaddy were down 0.16 percent at the close Friday. 

  • Shares of Wix were down 6.36 percent. 
  • Shares of Endurance International Group were down 3.27 percent. 

Related Link:

Wix Is A 'Standout Premium-Growth Story,' And Jefferies Rates It A Buy

 

Related Articles (EIGI + GDDY)

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Posted-In: Content Management Goldman Sachs Heath Terry israel Mark Grant Website BuildingAnalyst Color Analyst Ratings Best of Benzinga

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