GoDaddy Stock: Strong Cash Flow Poised for a Re-Rating?

We think GoDaddy (GDDY) stock is worth a look: It is growing, producing cash, and available at a significant valuation discount. Companies like this can use cash to fuel additional revenue growth, or simply pay their shareholders through dividends or buybacks. Either move makes them attractive to the market.

What Is Happening With GDDY

GDDY stock is available at a significant discount to its 3-month, 1-year, and 2-year highs. This can be attributed to market sensitivity over growth segments and intensified competition in core offerings. A tempered pace in new customer acquisition also contributed.
The stock may not reflect it yet, but here is what’s going well for the company: GoDaddy enhanced average revenue per user via advanced business applications and managed services adoption. This shift to higher-value offerings and strong renewals drives significant cash flow. Financial stability is maintained, with guidance indicating momentum in commerce and AI solutions.

GDDY Has Strong Fundamentals

• Cash Yield: GoDaddy offers an impressive cash flow yield of 12.7%.
• Growing: Revenue growth of 8.7% over the last twelve months means that the cash pile is going to grow.
• Valuation Discount: GDDY stock is currently trading at 32% below its 3-month high, 54% below its 1-year high, and 59% below its 2-year high.

Below is a quick comparison of GDDY fundamentals with S&P medians.

*LTM: Last Twelve Months

But What About The Risk Involved?

While GDDY stock may be a compelling investment opportunity, it’s always helpful to be aware of a stock’s history of drawdown. GoDaddy fell about 29% during the 2018 correction, nearly 47% in the Covid selloff, and close to 30% in the inflation shock. Even with solid business fundamentals, the stock hasn’t been immune when the market turns sour. It shows that even well-regarded names can face significant dips when the broader environment gets rocky. Risk is real, no matter how strong the setup looks. But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, and outlook changes. Read GDDY Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

If you want to see more details, read Buy or Sell GDDY Stock.

Other Stocks Like GDDY

Not ready to act on GDDY? You could consider these alternatives:

1. Oracle (ORCL)
2. AppLovin (APP)
3. Intuit (INTU)

We chose these stocks using the following criteria:

1. Greater than $2 Bil in market cap
2. Positive revenue growth
3. High free cash flow yield
4. Meaningful discount to 3M, 1Y, and 2Y highs

A portfolio that was built starting 12/31/2016 with stocks that fulfill the criteria above would have performed as follows:

• Average 6-month and 12-month forward returns of 25.7% and 57.9% respectively
• Win rate (percentage of picks returning positive) of >70% for both 6-month and 12-month periods

Portfolios Over Individual Stock Picks

Individual stocks can soar or tank but one thing matters: staying invested. The right portfolio can help you stay invested, capture upside and mitigate the downside associated with any individual stock.

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