It has been about a month since the last earnings report for GoDaddy (GDDY - Free Report) . Shares have added about 3.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is GoDaddy 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 catalysts.
GoDaddy Misses Q2 Earnings Estimates, Beats Revenues
GoDaddy Inc. reported second-quarter 2020 adjusted loss of $4.06 per share against the Zacks Consensus Estimate of earnings of 17 cents. Also, the bottom line was down significantly from the year-ago quarter.
The company generated revenues of $806.4 million, up 9.4% year over year or 10.2% on a constant-currency (cc) basis. The reported figure surpassed the Zacks Consensus Estimate of $798 million.
The revenue growth was driven by strong performance of its product segments. Also, strong global expansion remained a positive.
International revenues were $266.1 million for the second quarter, up 7.4% year over year or 9.9% on a cc basis.
GoDaddy generates revenues from three segments — Domains, Hosting and Presence, & Business Applications.
Domains: The company generated revenues of $369.6 million (accounting for 46% of total revenues) from this segment. The figure improved 10.5% from the year-ago quarter on higher average selling price. The increase was driven by strong renewals and registrations.
Hosting and Presence: This segment generated revenues of $292.2 million (36% of revenues), increasing 4.4% on a year-over-year basis. The revenue growth can be primarily attributed to higher subscriptions to Websites and Marketing, as well as broad integrations. Also, partnerships aided revenue growth in this segment.
Business Applications: Revenues from this segment came in at $144.6 million (18% of revenues), increasing 17.6% year over year. The increase was driven by strong workspace renewals.
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. For the second quarter, total bookings of $936.3 million increased 10.7% year over year or 12.1% on a cc basis.
It gained more than 400 thousand new customers in the second quarter. The company now has more than 20 million paying customers.
Gross margin was 64.1%, down 140 basis points from the prior-year quarter.
Operating expenses (technology and development, marketing and advertising, & general and administrative) of $322.5 million increased 0.1% year over year.
Balance Sheet & Cash Flow
At second quarter-end, total cash and cash equivalents, along with short-term investments were $772.7 million compared with $851.4 million in first-quarter 2020. Accounts and other receivables were $33.4 million compared with $31.6 million in the first quarter.
Long-term debt was $18.1 billion at second quarter-end versus $18.4 billion in the first quarter.
Net cash provided by operating activities was $168.1 million compared with $233.3 million in the first quarter. Capital expenditure was $17.2 million at second quarter-end.
Additionally, adjusted free cash flow was $185.9 million for the reported quarter.
For the third quarter, management expects revenues to be $835 million, indicating year-over-year growth of 10%.
Segment wise, revenue growth is expected to be in double digits in Domains, mid single digits in Hosting and presence, and high teens in Business Applications.
For the full year, GoDaddy expects revenue growth of 10% from 2019.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 11.66% due to these changes.
At this time, GoDaddy has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, GoDaddy has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.