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GoDaddy (GDDY) Down 22% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for GoDaddy (GDDY - Free Report) . Shares have lost about 22% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is GoDaddy due for a breakout? 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 Q4 Earnings and Revenues Outpace Estimates

GoDaddy Inc. reported fourth-quarter 2020 adjusted earnings of 41 cents per share, surpassing the Zacks Consensus Estimate of 33 cents. Also, the bottom line was up 7.9% from the year-ago quarter.

The company generated revenues of $873.9 million, up 12% both on a year-over-year and constant-currency (cc) basis. The reported figure also surpassed the Zacks Consensus Estimate by 1.01%.

The revenue growth was driven by strong performance of its product segments. Also, strong global expansion remained a positive.

International revenues were $293.2 million for the fourth quarter, up 12.2% year over year or 12.3% on a cc basis.

Segmental Revenues

GoDaddy generates revenues from three segments — Domains, Hosting and Presence, as well as Business Applications.

Domains: The company generated revenues of $402.2 million (accounting for 46% of total revenues) from this segment. The figure improved 14.2% 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 $308.8 million (35% of revenues), which increased 5.5% 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 $162.9 million (19% of revenues), increasing 12.2% year over year.

Operating Metrics

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 fourth quarter, total bookings of $943.1 million increased 13.1% year over year.

It gained more than 1.4 million new customers in the fourth quarter, nearly double the number added in 2019.

Operating Results

Gross margin was 65.5%, up 20 basis points from the prior-year quarter.

Operating expenses (technology and development, marketing and advertising, as well as general and administrative) of $353.9 million increased 17% year over year.

Balance Sheet & Cash Flow

At fourth quarter-end, total cash and cash equivalents, along with short-term investments were $765.2 million compared with $621.8 million in third-quarter 2020. Accounts and other receivables were $41.8 million compared with $38.7 million in the third quarter.

Total debt was $3.2 billion and net debt was $2.4 billion for the fourth quarter.

Net cash provided by operating activities was $165.9 million compared with $197.3 million in the third quarter. Capital expenditure was $27.4 million at fourth quarter-end.

Additionally, adjusted free cash flow was $181.1 million for the reported quarter.

Guidance

For the first quarter, management expects revenues to be $885 million, indicating year-over-year growth of 12%.

For 2021, management expects revenues to be $3.7 billion, indicating year-over-year growth of 12%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -23.75% due to these changes.

VGM Scores

At this time, GoDaddy has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, 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.

Outlook

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


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