Should you go for GoDaddy?
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.