GoDaddy (GDDY) Up 7.8% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for GoDaddy (GDDY). Shares have added about 7.8% 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 drivers.
GoDaddy Q3 Earnings and Revenues Outpace Estimates
GoDaddy Inc. reported third-quarter 2020 adjusted earnings of 38 cents per share, surpassing the Zacks Consensus Estimate of 31 cents. However, the bottom line was down 9.5% from the year-ago quarter.
The company generated revenues of $844.4 million, up 11% year over year or 11.2% on a constant-currency (cc) basis. The reported figure also surpassed the Zacks Consensus Estimate of $835.3 million.
The revenue growth was driven by strong performance of its product segments. Also, strong global expansion remained a positive.
International revenues were $283.7 million for the third quarter, up 11.6% year over year or 12% on a cc basis.
Segmental Revenues
GoDaddy generates revenues from three segments — Domains, Hosting and Presence, & Business Applications.
Domains: The company generated revenues of $387.4 million (accounting for 46% of total revenues) from this segment. The figure improved 12.2% 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 $302.4 million (36% of revenues), which increased 6.1% 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 $154.6 million (18% of revenues), increasing 18.7% 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 third quarter, total bookings of $945 million increased 11% year over year or 11.2% on a cc basis.
It gained more than 1 million new customers in the third quarter, with more than 400,000 net customer additions.
Operating Results
Gross margin was 65.6%, up 40 basis points from the prior-year quarter.
Operating expenses (technology and development, marketing and advertising, & general and administrative) of $333.2 million increased 24.2% year over year.
Balance Sheet & Cash Flow
At third quarter-end, total cash and cash equivalents, along with short-term investments were $621.8 million compared with $772.7 million in second-quarter 2020. Accounts and other receivables were $38.7 million compared with $33.4 million in the second quarter.
Total debt was $3,161.7 million and net debt was $2,539.9 million for the third quarter.
Net cash provided by operating activities was $197.3 million compared with $168.1 million in the second quarter. Capital expenditure was $8.4 million at third quarter-end.
Additionally, adjusted free cash flow was $223.9 million for the reported quarter.
Guidance
For the fourth quarter, management expects revenues to be $865 million, indicating year-over-year growth of 11%.
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.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
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 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.
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