Mindset Value: “GoDaddy (GDDY) is the ‘800-Pound Gorilla’ in the Web Hosting Space”
CrossingBridge Advisors, an investment management firm, published its third-quarter 2022 investor letter – a copy of which can be downloaded here. The fund continues to find “money-good” bonds and leveraged loans that have attractive yields with potential for additional upside if anticipated events come to pass. On the other hand, the fund is avoiding industries that continue to struggle due to the impact of COVID. Try to spare some time to check the fund’s top 5 holdings for you to have an idea about their best stock picks this 2022.
In its Q3 2022 investor letter, CrossingBridge Advisors mentioned GoDaddy Inc. (NYSE:GDDY) and explained its insights for the company. Founded in 1997, GoDaddy Inc. (NYSE:GDDY) is a Tempe, Arizona-based publicly traded internet domain registrar and web hosting company with an $11.9 billion market capitalization. GoDaddy Inc. (NYSE:GDDY) delivered a -9.67% return since the beginning of the year, while its 12-month returns are up by 8.63%. The stock closed at $76.65 per share on December 12, 2022.
Here is what CrossingBridge Advisors has to say about GoDaddy Inc. (NYSE:GDDY) in its Q3 2022 investor letter:
"GoDaddy is the “800-pound gorilla” in the web hosting space as its attractive domain pricing and breadth of services has helped make it one of the largest global domain registrars. During the first half of 2022 the company has continued to display operating strength with revenues up over 10% and normalized EBITDA up nearly 25%. Meanwhile they continue to produce significant free cash flow, with over $450mm generated year-to-date. At the top of the capital structure, the first lien term loan has a coupon of LIBOR + 175 basis points and matures in February 2024.
Gross leverage through this loan is approximately 2.5x EBITDA based on estimates for 2022.15 With less than 17 months left to maturity, the loan is a good fit for the CrossingBridge Low Duration High Yield Fund. In their most recent earnings call, the company mentioned that they are evaluating the refinancing of this loan.
Given that it will become a current liability by the end of 1Q23, a near-term repayment would not be surprising. While we wait for that event, we’re enjoying a floating rate coupon providing a 5.56% yield-to-maturity based on the quarter-end price of 99. If company were to repay the loan one year prior to maturity, the annualized rate of return would be approximately 7.80% from the end of 3Q22 to February 15, 2023."
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Our calculations show that GoDaddy Inc. (NYSE:GDDY) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. GoDaddy Inc. (NYSE:GDDY) was in 38 hedge fund portfolios at the end of the second quarter of 2022, compared to 40 funds in the previous quarter. GoDaddy Inc. (NYSE:GDDY) delivered a 0.75% return in the past 3 months.
In October 2022, we published an article that includes GoDaddy Inc. (NYSE:GDDY) in 11 Best Content Delivery Network Stocks To Buy Now. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q3 page.
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Disclosure: None. This article is originally published at Insider Monkey.
