Competitors also get bump as GoDaddy soars.
GoDaddy went public yesterday and shares immediately shot up 30%, giving the company a $4 billion market cap. In very early trading today it’s up another 3%.
There are a number of similar public companies out there. I think the two closest comps are Endurance International (which owns Domain.com and a number of shared hosting companies) and Web.com.
Endurance International Group (EIGI) shares were up about 4% yesterday, giving the company a $2.6 billion market cap.
Like GoDaddy, EIGI carries a lot of debt. But the reason for the debt load is different. GoDaddy has debt because of the 2011 buyout; Endurance was a debt-powered rollup.
Web.com (WWWW) was up about 3% yesterday and has a market cap of just shy of $1.0 billion. The company owns Network Solutions and Register.com.
Shares of three other domain name companies were essentially flat yesterday: Rightside (NAME), Tucows (TCX) and Verisign (VRSN). None of these comps are as similar to GoDaddy as EIGI and WWWW.
Unfortunately most Wall Street investors do not understand how the domain business works and how to measure the success or the failure of an ICANN registrar. Go Daddy since its inception has relied on offering domain name registration and transfer below cost. That explains why the company has been losing money for the past many years they assist on revenue not profit . The expectation in the near future that the value of Go daddy share will be cut in half it would be caused by two factors that Go Daddy must deal with.
1. They can no longer sell domain names below cost as they have been doing for the past 10 years or so.
2. They must raise their prices for domain registration, transfers and renewals. This will lead many of their existing customers to transfer to other registrars that offer cheaper prices.
Go Daddy has a hard road ahead and people in the domain business will be watching GOOD LUCK.
Well said. I think this is why, decades later (yes, decades!), GoDaddy.com still has to spin its quarterly financial results as “EBIT positive” or “adjusted cash flow positive” because, when you look at the reported results (those that are public), have they ever reported a truly profitable quarter according to GAAP or IFRS accounting standards?
I think the fact they sell many domain names below cost as the reason they aren’t profitable. EIG is much the same way, though I like them a little better as they’re primarily in Web hosting, which carries a slightly higher margin. If they can get their affiliate commissions down or increase their renewal rates (at higher pricing) for existing customers, I think they can be profitable. They’re also slightly less susceptible to Google Domains intrusion into the domain registration business (though, admittedly, only until Google decides to roll out a paid Web hosting business to the mass market and not just as part of Google Apps). An acquisition of Wix or Weebly (or both) could be a ‘boon’ for either GoDaddy or EIG, but likely won’t come cheap.
If I were wanting to be a shareholder in a company in this space, I’d likely stick with VeriSign or NeuStar (though NeuStar’s loss of the North American Numbering Portability Administration contract will have an impact on its results) because they’re more stable, albeit a bit slower growing. The biggest risk here is regulatory and loss of long-term contract risk.
Tucows is like stale bread. It provides some sustenance but no real nourishment longer term and, once the gTLD private auctions from competitions dries up, it goes back to being a domain registrar in slight decline, seller of niche and high-profile domains in the aftermarket and, essentially, a mobile virtual network cell phone provider in the U.S.
Cheers,
Doug
Andrew It is too sad to see most of your blogs are self-serving you have deleted my comment about go daddy .