Seeking Alpha had an article published by a member (Sneha Shah) who felt Go Daddy was too expensive to buy right now, he pointed out valuation compared to peers, the business being a low margin business and competition from the likes of Google.
From the article:
GoDaddy negatives
1) Valuation and Debt – I think that GoDaddy can be an attractive investment but at a much lower price. The company’s stock price has jumped by more than 30%, since it did its IPO at $20. The company is not making a profit, though it is generating a free cash flow of more than $100 million. The valuation at more than $4 billion is a bit too high for a company that’s operating at moderate margins and does not have a great growth profile either. The company’s underwriters are coming out with favorable sell side reports, despite no favorable catalysts. GoDaddy has a net debt of around ~$850 million which is a bit high considering the technology sector. Though it does not face any liquidity risk, this means that the company’s enterprise value is more near $5 billion. Its EV/EBITDA ratio is quite high at more than 10x. The company’s P/B ratio at 10.6x is at a ~50% premium to its listed competitor web.com (NASDAQ:WWWW).
Read the full article here
I don’t know that I would put Google as a real worry for Go Daddy, they are involved in a million things and will never focus on domain names imo. Plus Google does not have an auction platform, Go Daddy Auctions is a cash cow, Go Daddy does nothing and a name like uJet.com expires and they sell it for $9,200. Google does not and will not have that revenue stream.
Go Daddy needs to make sure they continue to work on security and make sure customers can feel safe about their domain names not getting stolen, and if they do they can get them back. Blake Irving has focused on Go Daddy being a one stop shop for small business, a lot of other products have higher margins than domain names, if they execute their game plan in the small business offerings then they should be able to be profitable.
Disclosure: I have no postition in Go Daddy long or short.