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blue-chip

How the Needle Is Moving On These US-Listed Plays – GDDY, EVER

Sep 08, 2021 | Team Kalkine
How the Needle Is Moving On These US-Listed Plays – GDDY, EVER

GoDaddy Inc.

GDDY Details

GoDaddy Inc. (NYSE: GDDY) provides cloud-based solutions and personalized customer support to small businesses, web design professionals, and individuals. It offers website creation, hosting, and security tools to protect the customers' online presence and services such as connecting to customers and managing the business. As of September 07, 2021, the company's market capitalization stood at USD 12.68 billion.

Enhancing Options for Customers: On August 24, 2021, GDDY added GoDaddy Invoicing and Payments, the latest tool in the hub by GoDaddy Pro, which offers more accessible and faster invoice processing solutions for web designers and developers using an integrated, user-friendly interface. The tool was created using the technology acquired through the Poynt acquisition in December 2020. This news follows the launch of Pay Links and Virtual Terminal Features on August 17, 2021, enabling small business owners to accept online payments without needing a website or online store.

Share Repurchase Program: On August 12, 2021, GDDY signed an accelerated share repurchase agreement (ASR) with Goldman Sachs & Co. LLC to buy back common shares worth USD 250 million under its share repurchase program. Post-ASR-related reduction, GDDY will have repurchased ~6.9 million shares in aggregate on a YTD basis and ~16.9 million shares since January 2020, representing 4% and 9% of the total shares outstanding. The ASR settlement is expected to close in Q3FY21, after which the available share repurchase authorization will amount to ~USD 750 million.

Q2FY21 Results: The company reported YoY growth of 15.49% in total revenue to USD 931.3 million in Q2FY21 (ended June 30, 2021) compared to USD 806.4 million in Q2FY20. The Domains segment, which accounted for 46.89% of the total revenue in Q2FY21, reported YoY growth of 18.15%. GDDY reported a net income of USD 46.8 million in Q2FY21 vs. a net loss of USD 673.2 million in Q2FY20. As of June 30, 2021, the company had cash & cash equivalents of USD 1.38 billion and total debt of USD 3.89 billion.

Financial and Operational Metrics (Source: Earnings Presentation, August 04, 2021)

Key Risks: GDDY operates in the highly competitive IT Services industry and faces direct competition from established players like Google, Amazon, and Microsoft, which could cause pricing pressure. Should this trend continue, it could harm its financials. Furthermore, GDDY relies on third parties to undertake various technical, processing, servicing, and support functions. Therefore, any discord with the third parties could adversely impact its operations.

Outlook: In Q3FY21, GDDY expects to generate total revenue of ~USD 945 million, thus realizing 12% YoY growth. For FY21, it expects to clock revenue of ~USD 3.75 billion, representing a 13% YoY increase, along with a 16% YoY growth in unlevered free cash flow to ~USD 955 million.

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 stock price decreased 14.01% in the past nine months and is currently trading in the lower band of its 52-week range of USD 68.66 to USD 93.75. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 49.52. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 89.60. Considering the correction in the stock price, decent balance sheet, current valuation, and associated risks, we recommend a "Buy" rating on the stock at the closing price of USD 75.08, up 0.16% as of September 07, 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.

 

EverQuote, Inc.

EVER Details

EverQuote, Inc. (NASDAQ: EVER) is an online insurance marketplace in the US that connects seekers of insurance products to a network of insurance providers to acquire a relevant quotation for auto, home, and life insurance products. EVER generates its revenue by selling consumer referrals to insurance carriers and agents, and indirect distributors. Direct channels account for most of the company's revenue.

Inorganic Growth Initiatives: On August 16, 2021, EVER closed the acquisition of PolicyFuel and its subsidiaries, providing policy-sales-as-a-service (PSaaS) services to its carrier clients in the property and casualty (P&C) insurance segments, for ~USD 16 million in cash plus additional contingent stock consideration. PolicyFuel enables EVER to widen its product offering to tap its total addressable market's USD 135 billion commission component. Concurrent with the acquisition, EVER issued 310,651 performance-linked stock units with a three-year vesting period (subject to accomplishment of its revenue target), to eight newly hired employees, and 52,529 restricted stock units (with a four-year vesting period) to seven employees. Each of the performance and restricted stock units will entitle the recipient to one EVER common share.

Q2FY21 Results: The company reported YoY growth of 34.18% in total revenue to USD 105.06 million in Q2FY21 (ended June 30, 2021) compared to USD 78.30 million in Q2FY20. The Automotive segment, which accounted for 82.20% of the total revenue in Q2FY21, increased by 33.69% YoY, whereas the Other segment reported YoY growth of 36.45%. Net loss for the company reduced to USD 1.88 million in Q2FY21 vs. USD 2.81 million in Q2FY20. As of June 30, 2021, the company had a cash balance of USD 54.52 million and no outstanding debt.

Profitability Profile (Source: Investor Presentation, August 2021)

Key Risks: In H1FY21, EVER's top customer, Progressive Casualty Insurance Company, accounted for 19% of its revenue. Hence, any decrease in purchases or loss of this crucial customer could harm the company's financials. Furthermore, the majority of EVER's insurance agencies are associated with a limited number of insurance carriers. As a result, any revocation or modification in a contractual relationship with these insurance carriers could adversely impact the company's business.

Outlook: In Q3FY21, EVER expects its revenue to range between USD 109 - 111 million, thus realizing YoY growth of 22% at the mid-point. Adjusted EBITDA is estimated to range between USD 4.5 - 5.5 million. For FY21, revenue is expected to be between USD 440 - 446 million, representing a 28% YoY increase at the mid-level, and adjusted EBITDA is estimated to be around USD 23 - 26 million.

Valuation Methodology: Price/Cash Flow 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.

EVER Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: EVER's stock price declined 47.85% in the past six months and is currently leaning towards the lower band of its 52-week range of USD 18.35 to USD 54.96. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 47.84. We have valued the stock using the Price/Cash Flow-based relative valuation methodology and arrived at a target price of USD 26.64. Considering the significant correction in the stock price, recent acquisition, robust balance sheet, current valuation, and associated risks, we recommend a " Speculative Buy " rating on the stock at the current price of USD 21.51, up 6.96% as of September 07, 2021, 1:07 PM 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.