GoDaddy (GDDY) Up 10.3% Since Earnings Report: Can It Continue?

A month has gone by since the last earnings report for GoDaddy Inc. GDDY. Shares have added about 10.3% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is GDDY due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

GoDaddy (GDDY) Beats on Q4 Earnings & Revenues Estimates

GoDaddy’s fourth-quarter 2017 adjusted earnings of 11 cents per share were above the Zacks Consensus Estimate by 2 cents. Earnings increased 10% from the year-ago quarter.

Management remains positive about strong product and marketing roadmap for 2018. The company’s mobile-optimized website builder, GoCentral, has been gaining momentum. The company has been making continuous efforts to enhance its features. It recently added online appointment scheduling, payments via Square, blogging capabilities and integration with Google My Business, among many other features.

Revenues

Revenues of $602 million increased 3.4% sequentially and 23.9% year over year, beating the Zacks Consensus Estimate of $593.0 million. Moreover, the reported figure came above management’s guidance of $591-$596 million.

At the end of the fourth quarter, customers were nearly 17.3 million, increasing 17.6% year over year. Also, average revenue per user (ARPU) was $139, up 7.4% from the prior-year quarter.

Strong growth in customers, contribution from HEG acquisition and expanding ARPU led to the improvement.

Segmental Revenues

GoDaddy generates revenues from three segments — Domain, Hosting and Presence, and Business Applications.

Domain revenues of $281.6 million contributed 46.8% to total revenues. Revenues were up 3.7% sequentially and 16.1% year over year.

Hosting and Presence revenues of $228.8 million accounted for 38% of total revenues. The figure represented 1.3% sequential and 29.5% year-over-year growth.

Business Applications revenues of $91.8 million, which accounted for 15.2% of total revenues, increased 8.3% sequentially and 37.6% from the year-ago quarter.

Booking

GoDaddy uses total bookings as a performance measure since payment is usually collected at the time of sale, and recognizes revenues ratably over the term of customer contracts. In the fourth quarter, total bookings of $657.9 million increased 25.4% year over year.

Margins

Gross margin was 66.5%, up 86 basis points (bps) sequentially and 188 bps from the prior-year quarter.

Operating expenses of $377.2 million increased 28% year over year.

Net Income

The quarter’s GAAP net income was $94.8 million against net loss of $0.8 million in the year-ago quarter.

Pro forma earnings were 11 cents compared with 10 cents reported in the prior-year quarter.

Balance Sheet & Cash Flow

On Dec 31, 2017, total cash and cash equivalents and short-term investments were $595 million compared with $553.3 million in the third quarter. Accounts and other receivables were $18.4 million compared with $17.3 million in the prior quarter.

Total long-term debt, including current portion, was $2.48 billion, while net debt was $1.89 billion in the fourth quarter.

Net cash provided by operating activities in the fourth quarter was $104.3 million compared with $131.4 million in the prior quarter.

Guidance

For the first quarter of 2018, the company expects revenues in the range of $620-$625 million. 

For full-year 2018, GoDaddy raised its revenue guidance within $2.58-$2.61 billion, representing year-over-year growth of approximately 16%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been four revisions higher for the current quarter compared to three lower.

GoDaddy Inc. Price and Consensus

 

GoDaddy Inc. Price and Consensus | GoDaddy Inc. Quote

VGM Scores

At this time, GDDY has a nice Growth Score of B, though it is lagging a lot on the momentum front with an F. The stock was also allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is suitable solely for growth based on our styles scores.

Outlook

Estimates have been broadly trending upward for the stock and the magnitude of these revisions looks promising. Notably, GDDY has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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