Welcome to CrushTheStreet.com’s Weekly Market Wrap Up!
Our top story for the week is the initial public offering for GoDaddy, which was finally realized after weeks of intense media scrutiny. Further adding pressure for the domain name registrar was the fact that it initially attempted to go public back in 2006 but failed to do so after investors shied away from its money-losing enterprise. At the time, GoDaddy officially cited “unfavorable market conditions” as the reason for the pull-out, which happened to coincide with the same year Google released its free web hosting service called “Google Page Creator.” But with the economy arguably in a worse situation now than it was a decade ago, and the American consumer lacking the naïveté or the hubris, will GoDaddy live up to its potential?
On paper, everything seems to move in GoDaddy’s favor. On the technical aspects of the IPO, the company priced its offering at 20-dollars per share, which is above its previously suggested range between 17 and 19 dollars. According to underwriting sources interviewed by Reuters, the IPO price pegs the total valuation of GoDaddy at approximately 4.5 billion dollars and would raise $440 million in cash-flow. In addition, top-line sales have risen about 52-percent over the past three years to hit roughly 1.4 billion dollars. Then there are the marketing ads, which heavily featured NASCAR driver Danica Patrick in scantily-clad clothing, if you can even call it that. Although it certainly wasn’t the most cerebral of advertising efforts, it did manage to put the GoDaddy brand name on the map, which enabled the company to branch out from a purely domain-driven business to one that offers full-scale web hosting solutions for small and medium sized organizations.
So What can Go Wrong?
…Plenty, according to Aaron Pressman of Yahoo Finance. One of the core criticisms that stymied GoDaddy’s IPO efforts in 2006 was the simple fact that the company made no profits. The story remains unchanged today, which recorded a 143-million dollar net loss for fiscal year 2014. The explanation for the short-fall was an accounting rule that forced the deferral of portions of subscription sales, which ironically was the same excuse made nine years ago by then CEO Bob Parsons. Investors didn’t like the BS in 2006 and it may be doubtful that they’ll buy it in 2015.
Another problem is the domain name and web hosting sector itself, which provides a two-tiered challenge. First, GoDaddy is up against serious competition in the form of Google, Amazon, and Microsoft. Amongst smaller competitors, it’s up against popular companies like Web.com Group and Wix. Neither of these two companies’ equity shares have performed well over the past three months, which is a common theme throughout this cutthroat, margin-intensive industry.
Finally, the very thing that endeared GoDaddy to most people…well, to most men…has eventually turned out to be liability. While the company cooled off its Danica commercials, it courted substantial controversy with a proposed Superbowl ad featuring a puppy being sold online. Some may begin to assume GoDaddy as being “gimicky,” which may as well be a death-sentence for today’s fickle consumer.
In financial news, the U.S. equities sector on Thursday gained modestly after suffering two consecutive sessions in the red, with both the Dow Jones and the benchmark S&P 500 closing up an average of 0.36-percent. It was an off-week for the precious metals complex, with gold regaining the 1,200 dollar mark, while silver lost some near-term momentum, dropping back to 16.70. Palladium is attempting a come-back rally after suffering a huge loss late last week, with the industrial metal closing just below 750 dollars. Finally, in digital currency news, bitcoin continued its descent from a failed rally, with the price appearing to stabilize at 250 dollars.
And that will do it for this edition. Thanks for watching and we’ll see you next week!