Key Summary: Starboard (7.8%) expressed disappointment in the company's performance on Sep 12, 2023, suggesting expense reduction and aiming for 40% growth + profitability by end 2024; On Jan 31, 2024, Starboard (6%) urged targeting 40% growth + profitability for FY2025, with potential for free cash flow/share to reach $9.00 (FY2024) and $14.00 (FY2026).Market Cap: $15 billion| GoDaddy Inc. engages in the design and development of cloud-based products in the United States and internationally.
Background
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On September 12, 2023, Starboard (7.8%) delivered a letter to the company expressing disappointment in the company's operational, financial, and stock price performance over the past 18 months. Starboard believes that the company has the potential to improve its growth and profitability metrics by reducing expenses, especially in Technology & Development.
Valuation insight
If GoDaddy achieves 7% revenue growth and 28% Adjusted EBITDA margins in Q4 2023, it can aim for a 40% growth + profitability metric by end of 2024. Regardless of 2024's revenue growth, cost-cutting measures are advised. Generating 7-8% revenue growth in 2024 with 32-33% Adjusted EBITDA margins could mean over $1.5 billion in Adjusted EBITDA. GoDaddy's undervaluation at 11x 2023E FCF could significantly improve with these targets, reaching a pro forma multiple of about 7x, closer to peers.
On October 17, 2023. Starboard delivered a presentation at the 2023 Active-Passive Investor Summit to highlight value creation opportunities at the company. It reiterated its belief that the company can reach growth and profitability of 40% by Q4'24E through a combination of stable growth and meaningful margin expansion.
Update
On January 31, 2024, Starboard (6%) delivered a letter to the company stating that the company's valuation still lags behind peers and historical trading multiples. At the 2024 Investor Day, it is suggested that GoDaddy should aim for at least 40% growth plus profitability for FY2025, aligning with industry standards.
Valuation insight
Starboard stated that, "With successful execution and share repurchases, the company could achieve over $9.00 of free cash flow per share in FY2024, growing to approximately $14.00 per share by FY2026."
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