A little of the lustre on GoDaddy Inc. shares has come off since its successful market debut on April 1, but analysts seem very confident that more gains are coming.
The website-hosting service jumped more than 30 per cent on its first trading day, but has since retracted about five percent.
RBC Capital Markets and J.P. Morgan – both underwriters for that IPO – initiated coverage of GoDaddy with buy ratings on Monday.
Analyst Sterling Auty at J.P. Morgan is the more bullish of these two, with a US$33 price target.
He expects GoDaddy’s growth to benefit from a healthy environment for small , medium-sized businesses (SMBs), its expanding international presence, and also the emergence of new generic top-level domains such as .shop, .science and .bank.
Calling it the Wal-Mart of the domain industry, Auty noted that GoDaddy’s large marketing and advertising investments have produced an 81-per-cent brand awareness level within the U.S., serving to draw in the largest amount of customers in the industry.
“While there are a number of other competitors within the space, we believe GoDaddy will continue to get a disproportionate amount of traffic and thus the largest potential customer conversion opportunity,” the analyst said inside a report.
Mark Mahaney at RBC, whose price target around the stock is US$30, noted that GoDaddy is one of the strongest recent Internet IPOs because of its 13 million customers, substantial share of the market, and consistent growth and profitability.
He thinks the organization faces a multi-billion-dollar total addressable market which includes more than 200 million SMBs worldwide. Nearly 500,000 smaller businesses are started every month in the U.S. alone, and most half are not currently online.
Mahaney also noted that GoDaddy’s business model consistently generates double-digit revenue growth and EBITDA margins in the high teens.
“We view the GoDaddy management team as particularly strong and experienced,” the analyst told clients. “We also believe the organization has developed significant competitive advantages located in part on its large size and scale.”