Redesigned Managed WordPress And Airo Will Boost Customer Engagement In 2025

Key Takeaways

• Strategic pricing, bundling, and seamless experiences could drive revenue growth and improve customer engagement in the hosting business.
  
• Cost optimization through AI and tech may enhance margins, while commerce initiatives boost transactions and payment volume.
  
• Strategic shifts and marketing investments pose short-term revenue and margin constraints, with risks on customer engagement impacting future growth and profitability.

Catalysts

Engages in the design and development of cloud-based products in the United States and internationally.

• GoDaddy's pricing and bundling initiatives are set to drive significant growth in 2025, focusing on presence products and customer cohorts within the hosting business, which could lead to increased revenue and average order value.
  
• The company's seamless experience initiative, with enhancements like the redesigned Managed WordPress platform and Airo Site Designer, aims to improve conversion and customer engagement, potentially increasing renewal rates and driving higher revenue.
  
• The commerce initiative, including GoDaddy Capital and expanded payment options, is expected to boost gross payment volume and transactional revenue growth significantly, impacting overall revenue positively.
  
• Cost optimization strategies involving technology and AI are likely to lower operational costs, which could enhance net margins and free cash flow over time.
  
• The traction and monetization of GoDaddy Airo and Airo Plus, supported by marketing efforts, are expected to increase product attach rates and improve customer lifetime value, positively impacting earnings and revenue growth.

GoDaddy Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming GoDaddy's revenue will grow by 7.5% annually over the next 3 years.
• Analysts assume that profit margins will increase from 20.5% today to 22.7% in 3 years time.
• Analysts expect earnings to reach $1.3 billion (and earnings per share of $9.11) by about April 2028, up from $936.9 million today. However, there is some disagreement amongst the analysts with the more bullish ones expecting earnings as high as $1.5 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 30.2x on those 2028 earnings, up from 26.0x today. This future PE is lower than the current PE for the US IT industry at 33.9x.
• Analysts expect the number of shares outstanding to grow by 0.29% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.18%, as per the Simply Wall St company report.

GoDaddy Future Earnings Per Share Growth

Risks

• GoDaddy's proactive strategic initiatives in platform integration, including divestitures, might lead to short-term revenue impacts despite long-term benefits. This focus on simplification could temporarily limit revenue growth.
  
• The company's emphasis on high-value customer acquisition and the cessation of deep discounting could result in fewer new customer sign-ups and potential declines in revenue and market share.
  
• The international revenue growth for GoDaddy is hindered by currency headwinds, which could impact the company's overall revenue growth expectations and profit margins.
  
• GoDaddy's substantial marketing investment, particularly in the Airo launch, presents an increased operating expense that may compress short-term earnings and impact net margins.
  
• Continued reliance on further monetization and customer retention improvements from the Airo initiative poses risks if customer engagement does not meet expectations, potentially affecting future revenue and free cash flow growth.

Valuation

• The analysts have a consensus price target of $215.808 for GoDaddy based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $275.0, and the most bearish reporting a price target of just $150.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $5.7 billion, earnings will come to $1.3 billion, and it would be trading on a PE ratio of 30.2x, assuming you use a discount rate of 8.2%.
• Given the current share price of $172.2, the analyst price target of $215.81 is 20.2% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.