Citi Says Buy The Dip In GoDaddy

With the stock down nearly 8 percent over the past three months and much of the downside arriving in recent weeks, shares of Godaddy Inc GDDY are a buying opportunity, according to Citi.

The Analyst

Citi's Mark May upgraded GoDaddy from Neutral to Buy with an $86 price target.

The Thesis

Citi's prior neutral stance on GoDaddy's stock was based mostly on valuation concerns, May said in the upgrade note. (See his track record here.) 

Investors should consider taking advantage of the recent weakness in the overall market and GoDaddy's stock for the following reasons, the analyst said:

• The company's profitability. 
• GoDaddy's free cash flow-generating business.
• An attractive, subscription-based revenue model.
• Leadership in a "stable" competitive environment.
• A strong management team with a track record of execution.

Citi's $86 price target is based on a combination of expectations for a 10-year revenue compounded annual growth rate of 10 percent, a 30-percent terminal free cash flow margin, a nine times terminal free cash flow multiple and a 7-percent discount rate.

Price Action

GoDaddy shares were trading up 1.7 percent at $72 at the time of publication Thursday.

Related Links:

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

GoDaddy Surges On Strong Guidance, 216K More Net Customers

Photo courtesy of GoDaddy.