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Why Is GoDaddy (GDDY) Down 2.4% Since Last Earnings Report?

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A month has gone by since the last earnings report for GoDaddy (GDDY). Shares have lost about 2.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is GoDaddy due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

GoDaddy Q1 Earnings Lag Estimates, Revenues Up Y/Y

GoDaddy reported first-quarter 2021 adjusted earnings of 6 cents per share that missed the Zacks Consensus Estimate by 80.7% and declined 75% year over year.

The company generated revenues of $901.1 million, up 13.8% year over year. At constant-currency (cc), revenues increased 13.4%. The figure beat the consensus mark by 1.8%.

International revenues were $303.1 million, up 15.5% year over year or 14.4% on a cc basis.

Segmental Revenues

GoDaddy generates revenues from three segments — Domains, Hosting and Presence, as well as Business Applications.

Domains: The company generated revenues of $422.7 million (accounting for 46.9% of total revenues) from this segment. The figure improved 18.8% from the year-ago quarter on higher average selling price.

Hosting and Presence: This segment generated revenues of $310.3 million (34.4% of revenues), which increased 4.4% on a year-over-year basis.

Business Applications: Revenues from this segment came in at $168.1 million (18.7% of revenues), increasing 21% year over year.

GoDaddy uses total bookings as a performance measure since payment is usually collected at the time of sale and recognizes revenues ratably over the term of customer contracts. For the first quarter, total bookings of $1.09 billion increased 14.5% year over year or 13.5% at cc.

Operating Results

Gross margin was 64.4%, down70 basis points (bps) year over year.

Operating expenses (technology and development, marketing and advertising, as well as general and administrative) were $541.9 million, up20.3% year over year.

Operating income declined 41.1% year over year to $38 million.

Balance Sheet & Cash Flow

As of Mar 31, 2021, cash and cash equivalents were $1.29 billion compared with $765.2 million as of Dec 31, 202.

Total debt was $3.90 billion and net debt was $2.61 billion in the first quarter.

Unlevered free cash flow was $268.3 million in the reported quarter.

Guidance

For the second quarter, GoDaddy expects revenues to be $920 million, indicating year-over-year growth of roughly 14%.

For 2021, GoDaddy expects revenues to be $3.745 billion, indicating year-over-year growth of roughly 13%.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -19.08% due to these changes.

VGM Scores

Currently, GoDaddy has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise GoDaddy has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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