GoDaddy Inc.

GDDY Details

GoDaddy Inc. (NYSE: GDDY) is a provider of cloud-based products and customized customer services to small enterprises, web designers and individuals. It provides website creation, hosting, and security tools to protect the customers' online presence and services such as connecting to customers and managing the business. GDDY derives its revenue from selling subscriptions, such as domain registrations and renewals, hosting and presenting solutions, and business apps. As of December 03, 2021, the company's market capitalization stood at USD 11.55 billion.

Latest News:

• Recent Acquisition: On November 11, 2021, GDDY signed an agreement to acquire Pagely, founder of Managed WordPress, in 2009. GDDY plans to construct a global WooCommerce Software as a service (SaaS) platform based on Pagely's platform and cloud capabilities, with the highest stability, security, and performance levels.

Q3FY21 Results:

• Growth in Topline: The company's total revenues in Q3FY21 (ended September 30, 2021) were USD 964.0 million, a 14.16% increase YoY from USD 844.4 million in Q3FY20, attributable to growth in total customers and average revenue per user and contributions from the recent acquisition of Poynt, an all-in-one payment platform in February 2021.
• Surge in Net Income: Net income for Q3FY21 increased 50.70% YoY and stood at USD 97.5 million compared to USD 64.7 million in Q3FY20.
• Surge in Bookings: It recorded an increase in total bookings to USD 1.04 billion in Q3FY21 vs. USD 0.95 billion in Q3FY20.
• Cash and Debt Position: As of September 30, 2021, the company had cash & cash equivalents of USD 1.14 billion and total debt of USD 3.89 billion.

Key Risks:

• Competition Risk: GDDY operates in a highly competitive IT services industry, where it competes against significant players such as Google, Amazon, and Microsoft, putting pricing pressure on the company. Should this trend continue, it could adversely impact the company's financials.
• Dependence on Third-Parties: GDDY relies on third parties for various technical, processing, servicing, and support functions. Hence, these third parties' failure of contractual obligation could impair its results.

Outlook: 

• Q4FY21 Guidance: In Q4FY21, GDDY expects to generate revenues of more than USD 970 million, representing a YoY growth of 11%.
• FY21 Guidance: For FY21, GDDY forecasts to clock revenue of USD 3.765 billion, reflecting YoY growth of 14%. It has raised its FY21 unlevered free cash flow projection to over USD 960 million, reflecting a 16% growth.
  

Valuation Methodology: Price/Earnings Per Share-Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

GDDY Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

GDDY's share price has declined 14.43% in the past six months and is currently leaning towards the lower-band of the 52-week range of USD 65.70 to USD 93.75. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 47.73. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 85.39.

Considering the correction in the stock price in the past six months, strong profitability margins, current valuation, and associated risks, we recommend a "Buy" rating on the stock at the closing price of USD 69.17, down 0.27% as of December 03, 2021.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached. 

Altice USA, Inc.

ATUS Details

Altice USA, Inc. (NYSE: ATUS) is a US-based broadband communications and television services provider. It conducts its business through two operating segments 1) Optimum, which is in the New York metropolitan area, and 2) Suddenlink, primarily in markets in the south-central United States. It offers internet, television, telephony, and mobile services to over five million residential and business customers.

Latest News:

• Fiber Network Expansion: On November 09, 2021, following its debut into the market through a series of acquisitions in June, Lightpath, an ATUS subsidiary, announced a 50-mile extension of its all-fiber network in the Boston area. As a result, the total route miles in the Boston metropolitan region now reach 130, owing to the addition of 50 route miles to the network.

9MFY21 Results:

• Slight Increase in Sales: The company reported a minor increase of 2.86% in revenues to USD 7.57 billion during 9MFY21 (ended September 30, 2021) compared to USD 7.36 billion during 9MFY20.
• Surge in Net Income: ATUS recorded a sharp uptick in net income to USD 750.22 million in 9MFY21 vs. USD 107.21 million in 9MFY20.
• Leveraged Balance Sheet: As of September 30, 2021, the company had cash and cash equivalents of USD 232.45 million and total debt of USD 26.77 billion.
• Improvement in ARPU: The company recorded an increase in Average Revenue Per User (ARPU) to USD 140.73 as of September 30, 2021, from USD 138.16 as of September 30, 2020.

Key Risks:

• Supplier Concentration Risk: Since ATUS' cable systems employ one or two proprietary technological designs, the company buys set-top boxes and other customer premise equipment from a limited number of sellers. Any failure on the contractual obligation by vendors could harm its operations.

Outlook:

• FY21 Cash Capex and FCF Estimates: As of Q3FY21, ATUS expects to incur Cash Capex of ~USD 1.3 billion in FY21, with an anticipated Free Cash Flow (FCF) of around USD 1.6 billion.
• FY22 Estimates: ATUS plans to increase its cash capital expenditures to USD 1.7–1.8 billion in FY22, including the costs of opening 50–75 new retail locations.
  

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

ATUS Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

ATUS' share price has declined 51.07% in the past twelve months and is currently leaning towards the lower-band of the 52-week range of USD 15.48 to USD 38.30. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 48.08. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 20.32.

Considering the correction in the stock price in the past twelve months, strong profitability margins, current valuation, and associated risks, we recommend a "Buy" rating on the stock at the current price of USD 16.95, up 1.44% as of December 03, 2021, 11:13 AM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.