GoDaddy Inc. (NYSE:GDDY) stock has been pretty quiet since the company went public back on April 1. After surging some 31% immediately following its initial public offering of $20 per share, GDDY has since slipped about 5% as traders turned their focus elsewhere.
But GDDY stock is once again front and center this week, as GoDaddy gets set to release its first quarterly report as a publicly traded company.
After the close of trading tomorrow, GoDaddy is expected to post a first-quarter profit of 22 cents per share. GDDY stock traders should take this figure with a grain of salt, as the shares have only just begun to attract attention from the analyst community. In fact, Thomson/First Call lists only one brokerage firm as doling out a rating, with Craig-Hallum initiating the stock with a “buy” rating and a $30 price target on April 27.
But GDDY is gaining momentum today, with both Morgan Stanley and RBC Capital initiating coverage on the shares.
Citing sustainable revenue growth and margin expansion, Morgan Stanley started GDDY with an “overweight” rating and a $29 price target, while RBC Capital noted GoDaddy’s market share and consistent growth when it initiated coverage with an “outperform” rating and a $30 price target.
With analyst coverage just beginning to take hold, GDDY stock has plenty of upside potential at this point.
Turning our attention to the options pits, GoDaddy has steadily garnered a respectable amount of attention from options traders despite the equity’s newness. That said, opinions appear to be all over the sentiment map.
On one hand, GDDY’s May put/call open interest ratio arrives at bullish 0.49, with calls more than doubling puts among options set to expire at the end of this week. On the other hand, the May/June put/call open interest ratio balloons to 2.41, with puts more than doubling calls for the front two months of options.
Click to Enlarge Overall, May implieds are pricing in a potential post-earnings move of about 7.6% for GDDY stock. This places the upper bound at $26.89, while the lower bound lies at $23.11. GDDY stock currently sports an all-time high of $27.27 set on April 2, while the stock’s IPO of $20 represents its current floor of technical support.
2 Trades for GoDaddy Stock
Call Spread: Anyone looking to trade GDDY stock, let alone GoDaddy options, should know that the stock is quite volatile at the moment. Furthermore, fresh off an IPO and without any comparative history, the risks of trading the shares ahead of earnings are even higher.
That said, if you have the stomach, the rewards can also be considerably greater.
For those traders willing to take the risk, GoDaddy has considerable upside potential, as evidenced by today’s influx of analyst initiations. A solid report tomorrow afternoon would only add fuel to the fire. As such, a May 26/28 bull call spread has considerable potential to double, triple, or even quadruple your profit potential – assuming the stock goes the right way and implieds don’t explode on the open this morning.
At last check, the May $26/$28 bull call spread was offered at 21 cents, or $21 per pair of contracts. Breakeven lies at $26.21, while a maximum profit of $1.79, or $179 per pair of contracts, is possible if GDDY closes at or above $28 when May options expire at the end of this week.
Put Sell: On the other hand, if you aren’t ready for the risk involved with such an aggressive play, then maybe a deep in-the-money put sell might fit the bill. As of the close on Friday, the May $22 put was bid at 42 cents, or $42 per pair of contracts. As long as GoDaddy stock closes above $22 when May options expire at the end of this week, traders will keep the initial premium received. Should GDDY trade below $22, however, you could be assigned 100 shares of GDDY stock for each put sold at a cost of $22 per share.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
