In back-to-back reports, SunTrust analyst Robert Peck sticks to his thesis that Web.com's (NASDAQ: WWWW) sell-off is overdone on Google's (NASDAQ: GOOG) announcement that it is entering domain registrations.
Peck remarked Tuesday on Google's natural position in the domain registration site "given the company's brand, search dominance, hosting capabilities, email solution, marketing channels (Google+, YouTube), and devices and apps. We believe Google could find success on inbound business globally, not just U.S."
The analyst commented that he expects no near-term impact from Google Domains. Peck emphasized that there will likely be an intermediate term impact, but it will be "moderate/manageable."
SunTrust believes that Web.com will keep its existing clients as Google enters the sector. The analyst added that Google's move "validates" market opportunity and sees possible consolidation with Wix.com and Endurance International Group.
Peck on Wednesday maintained his thesis and forecasts for the company, but lowered the price target from $38.00 to $34.00 to take the new competition and overhang into account. The analyst maintained his Buy rating noting the drop in shares creates a Buying opportunity for investors.
In studying sensitivity analysis on the company if gross subscriber adds fall short by five, 10 and 15 percent, SunTrust reported, "Our analysis indicates revenue growth could fall by 130 bps in our most conservative scenario, EBITDA/margin could fall from $198M/30% to $172M/26%, and EPS could fall from $2.99 to $2.54."
Web.com closed at $27.70 on Tuesday. The stock is currently up 2.67 percent at $28.44.
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