GoDaddy Inc. (NYSE:GDDY) received a lot of attention from a substantial price increase on the NYSE over the last few months. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on GoDaddy’s outlook and valuation to see if the opportunity still exists.
What is GoDaddy worth?
Great news for investors – GoDaddy is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is $109.59, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. GoDaddy’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
What kind of growth will GoDaddy generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With revenues expected to grow by 33% over the next couple of years, the future seems bright for GoDaddy. If the level of expenses is able to be maintained, it looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? Since GDDY is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on GDDY for a while, now might be the time to make a leap. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy GDDY. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.
If you'd like to know more about GoDaddy as a business, it's important to be aware of any risks it's facing. When we did our research, we found 2 warning signs for GoDaddy (1 is a bit concerning!) that we believe deserve your full attention.
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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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