Should you go for Go­Daddy?

Financial Mirror (Cyprus) - - FRONT PAGE -

Go­Daddy, known for its provoca­tive ad­ver­tise­ments as much as for its web host­ing ser­vices, is now the cen­tre of de­bate again. This time, the tech firm’s re­cent IPO has split an­a­lyst opin­ion, with many ex­press­ing their strong and op­pos­ing con­vic­tions about the mer­its of the com­pany and its fi­nan­cial po­ten­tial. Here’s what you need to know about the con­tro­ver­sial, new GDDY shares.

In its first day of trad­ing on the New York stock ex­change on April 1, Go­Daddy Inc raised around $600 mln. Such was the eu­pho­ria that of­ten ac­com­pa­nies big brand IPOs that the open­ing price of $20 per share was sig­nif­i­cantly higher at $26.15 when the mar­kets closed at the end of Wed­nes­day trad­ing. An in­cred­i­ble 23.14 mln shares of the hotly an­tic­i­pated stock changed hands dur­ing the course of the one day. But the re­cent his­tory of tech firms go­ing public should teach us that this early ex­cite­ment could eas­ily die down.

Go­Daddy’s CEO, Blake Irv­ing, summed it up per­fectly, “It’s an im­por­tant [day], but it’s just a mile­stone. And then the hard work be­gins.”

Those keenly buy­ing the stock point out that Go­Daddy’s rev­enue has risen over 50% in the past three years. It now boasts over 4,000 em­ploy­ees and 13 mln cus­tomers, and has grown from in­ter­net do­mains to of­fer­ing web­site build­ing and host­ing ser­vices for small and medium-sized busi­nesses. Around half of all small busi­nesses in the US are not yet on­line, leav­ing plenty of room for growth in the domain and host­ing in­dus­try. As a lead­ing and recog­nised brand in this mar­ket, and with a breadth of new prod­ucts, Go­Daddy has great po­ten­tial to ex­pand.

For more cau­tious in­vestors, how­ever, the fact that the firm has a long-term debt of around $1.3 bln, and has lost $3.5 mln over the last two years, un­der­mines all talk of growth. While its losses may have been smaller in 2014 to 2013, the com­pany is still far from prof­itable. On top of that, it now faces ad­di­tional com­pe­ti­tion from com­pa­nies like Ama­zon and Google who have re­cently jumped on the domain name bandwagon. Th­ese in­ter­net gi­ants will be hop­ing to at­tain a high mar­ket share and vie for the small busi­nesses which move on­line.

Can Go­Daddy com­pete in its own mar­ket space? When the firm at­tempted to go for an IPO in 2006, it pulled out of the deal due to un­favourable mar­ket con­di­tions. That hap­pened to be the same year that Google re­leased its free web host­ing ser­vice. For crit­ics, its pre­vi­ous fail is a bad omen. Yet, ar­guably, the fact that it has cho­sen to risk the same route again sug­gests that the com­pany must be more con­fi­dent now of its abil­ity to thrive in the mar­ket. CEO Irv­ing cer­tainly tried to con­vey this im­pres­sion. He said that the high de­mand for Go­Daddy’s ser­vices at present as well as the tech­no­log­i­cal ad­vances made since 2006, jus­tify the cur­rent tim­ing of the IPO.

If it wants to stay in the game and reap the re­wards of fi­nan­cial suc­cess, Go­Daddy will have to stay trendy for its cus­tomers and si­mul­ta­ne­ously prove to in­vestors that it can be taken se­ri­ously. Un­til that hap­pens, traders may be best stick­ing to short-term op­tions and prof­it­ing from the volatil­ity.

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