GoDaddy’s Stock Soars 57.7% YTD: Can the Bull Run Continue?
GoDaddy’s GDDY shares have been on a tear, outperforming the Zacks Computer & Technology sector and its peers like Shopify SHOP, BigCommerce BIGC and Alphabet GOOGL on a year-to-date basis. While GDDY shares are up a remarkable 57.7%, Alphabet has gained a more modest 16.9%. Shopify and BigCommerce have actually seen declines of 4.9% and 39.8%, respectively. This strong performance has led many to wonder – can the bull run continue?
Key Takeaways:
- GoDaddy’s shares have outperformed the Zacks Computer & Technology sector and its peers Shopify, BigCommerce, and Alphabet GOOGL on a year-to-date basis.
- GoDaddy’s strong financial results and impressive growth profile have been key drivers of its stock price performance.
- The company’s expanding portfolio, particularly its AI-powered offerings like GoDaddy Airo and GABI, is attracting new customers and driving customer engagement.
- GoDaddy’s focus on small businesses and its expansion into digital marketing with tools like the Digital Marketing Suite is attracting a wider clientele.
- The company’s Q3 2024 revenue guidance suggests continued growth, but analysts are concerned about the stock’s valuation.
GoDaddy’s Growth Strategy Fuels Stock Performance
GoDaddy’s success can be attributed to a number of factors, including its strong financial performance, impressive growth profile, and a strategy focused on expanding its portfolio of products and services to cater to small businesses.
AI Drives Engagement and Growth
GoDaddy Airo, an AI-powered experience, has proven to be a major driver of customer engagement. Over a million new customers have leveraged Airo in the second quarter, and half a million are actively using it. This is expected to enhance future monetization and retention. GoDaddy is also expanding Airo into over 90 countries in the coming months.
GoDaddy’s internal AI-powered guide assist bot, GABI, is now supporting over 60 languages, further enhancing customer interactions and operational efficiency.
Expanding Reach to Small Businesses
GoDaddy has made significant strides in attracting new customers by expanding its reach to small businesses. The company launched its Digital Marketing Suite in Q2 2024, providing personalized marketing tools to help users grow their business without even needing a website.
In May, GoDaddy expanded its Small Business GenAI Prompt Library, offering over 185 updated prompts and new capabilities to support small business owners globally.
Finally, in August, GoDaddy introduced Digital Marketing, an all-in-one solution designed to streamline marketing efforts with AI-powered tools, social media integration, and a unified inbox for small business owners.
Positive Q3 Guidance Suggests Continued Growth
GoDaddy’s expanding portfolio is positioned to attract more small businesses, which in turn will drive its top-line growth.
The company expects revenues of $1.13-$1.15 billion in Q3 2024, indicating year-over-year growth of 7% at the mid-point. This is slightly higher than the Zacks Consensus Estimate of $1.14 billion, suggesting 6.83% growth over the figure reported in the year-ago quarter.
The consensus mark for Q3 2024 earnings is currently pegged at $1.25 per share, up by a penny over the past 30 days.
Valuation Concerns Looming
While GoDaddy’s growth story is compelling, analysts are concerned about the stock’s valuation. The stock’s Value Style Score of D suggests a stretched valuation at this moment.
In terms of the forward 12-month Price/Sales ratio, GoDaddy is trading at 5.50X, significantly higher than its median of 3.86X and the Zacks Internet – Delivery Services sector’s 1.61X.
GoDaddy currently carries a Zacks Rank #3 (Hold), suggesting that investors may want to wait for a more favorable entry point in the stock.
Overall, while GoDaddy’s strong performance and growth strategy are compelling, its high valuation may present risks for investors considering adding the stock to their portfolios.
