Godaddy's AI Enhancement Drives Surprising Growth in Q1 2024 Earnings

Benchmark's Mark Zgutowicz raised their price target on Godaddy (NYSE: GDDY) by 5.3% from $150 to $158 on 2024/05/03. The analyst maintained their Strong Buy rating on the stock.

In their report, Zgutowicz highlighted Godaddy's AI enhancement, Airo™, as a key focus during the company's Q1 2024 earnings call. The analyst noted that the early and tangible benefits of Airo on the business, particularly in Applications & Commerce (A&C), were somewhat surprising. Zgutowicz stated, "With neither management's guidance nor Benchmark's estimates accounting for any revenue incrementality from Airo, it represents an upside catalyst."

Godaddy's Q1 2024 earnings exceeded expectations, with an EPS of $1.08, beating the Zacks Consensus Estimate by 8%. The revenue of $1.11 billion also surpassed the Zacks Consensus Estimate by 1.07%. Notably, A&C revenue saw a significant increase of 13.3% year-over-year, comprising 34.6% of total revenue. Core Platform revenue, which includes domains, aftermarket, hosting, and security, also saw growth of 3.9% year-over-year.

The company's management provided guidance for Q2 2024, expecting revenue in the range of $1.1 billion to $1.12 billion. They anticipate low to mid-teens growth in A&C revenue and low single-digit growth in Core Platform revenue. Additionally, management expects an EBITDA margin of 28%. For the full year 2024, Godaddy aims to achieve revenue between $4.5 billion and $4.56 billion, representing a year-over-year growth of 6.5% at the mid-point. They also project an EBITDA margin of 29% and free cash flow of at least $1.4 billion.

CEO Aman Bhutani expressed optimism about the company's performance, stating, "We are off to a great start in 2024, and we are excited to build on this momentum as we execute on our mission of empowering entrepreneurs everywhere and making opportunity more inclusive for all." CFO Mark McCaffrey emphasized their commitment to sustainable growth and disciplined capital allocation, highlighting the importance of leveraging their unified software platform to drive attach, conversion, and retention.

Following the release of Godaddy's earnings, several other analysts also updated their ratings and price targets for the stock. Morgan Stanley's Elizabeth Elliott raised their price target by 3.8% to $137 and maintained a Hold rating. Barclays' Trevor Young raised their price target by 15.4% to $150 and maintained a Strong Buy rating. Evercore ISI Group's Mark Mahaney raised their price target by 22.7% to $135 and maintained a Hold rating.

Currently, 71.4% of top-rated analysts rate GDDY as a Strong Buy or Buy, while 28.6% consider it a Hold. No analysts recommend or strongly recommend selling the stock.

The consensus forecast among analysts is that GDDY's upcoming year will deliver earnings per share (EPS) of $10.39. If the analysts' predictions are correct, GDDY's next yearly EPS will show a decline of 11.9% on a year-over-year basis.

Since the release of Godaddy's latest quarterly report on May 2, 2024, the stock price has experienced a slight decline of 0.6%. However, when comparing year-over-year, the stock has shown significant growth of 73.2%, outpacing the S&P 500, which has risen by 25.4%.

Benchmark analyst Mark Zgutowicz, who raised the price target and maintained a Strong Buy rating on GDDY, is ranked in the top 8% of Wall Street analysts by WallStreetZen. With an average return of 10.2% and a win rate of 53.6%, Zgutowicz specializes in the Communication Services, Consumer Cyclical, and Technology sectors.

Godaddy Inc., founded in 1997 and headquartered in Tempe, AZ, provides website domains, hosting, marketing, and e-commerce solutions for various customers, including small businesses, individuals, organizations, developers, designers, and domain investors. The company also offers GoDaddy Payments, a payment facilitator, as well as point-of-sale devices and associated software.

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