GoDaddy Inc. amended its S-1 filing on Thursday, and the web domain and hosting company is looking to fetch a value around $2.8 billion in its debut. The GoDaddy IPO price range was set between $17 and $19 per share; 22 million shares of GDDY stock will be offered and traded on the New York Stock Exchange.
At the high end of its range, GoDaddy would raise almost $420 million.
GoDaddy is mostly known in pop culture for its older Super Bowl commercials, which often featured scantily clad women or NASCAR driver Danica Patrick … or Danica Patrick herself being scantily clad.
While GoDaddy has dumped those racier commercials, there’s nothing in the S-1 convincing me to buy the GoDaddy IPO.
Sales Growing, But Not Profitable
GoDaddy’s S-1 isn’t the worst I’ve ever seen. In fact, if I didn’t care about that pesky thing called “profits,” I’d be snapping up GDDY stock left and right on its opening day.
First off, GoDaddy is a leader in its area, and there’s not a lot of complaints you can make about that. GoDaddy is the global leader in the domain name marketplace, with 21% of all domains in existence managed by the company. On top of that, revenue jumped by nearly 23% in 2014, and bookings rose 20% last year.
Worried that GoDaddy is too focused on just domains? It’s diversifying: Domain products accounted for 65%, 59%, and 55% of total revenue in 2012, 2013 and 2014, respectively.
But sales and diversification aren’t enough to make the GoDaddy IPO worth it. The Achilles’ heel of GDDY stock when it goes public will be its profitability — or lack thereof. It lost $143 million last year on its nearly $1.4 billion in sales.
And while GDDY may be the go-to name for domains and rudimentary hosting platforms today, by no means is it the only player. Indeed, there are a slew of public companies competing directly with GDDY. And, judging by their recent performance, GoDaddy stock may get roughed up in its early going.
Web.com Group Inc (NASDAQ:WWWW), Wix.com Ltd (NASDAQ:WIX) and Endurance International Group Hldgs Inc (NASDAQ:EIGI) all offer web design platforms for individuals and small businesses. WWWW stock and WIX stock are off 52% and 25%, respectively, in the last year. EIGI stock, while it has managed 38% one-year gains, looks bloated, trading at four times sales.
The GoDaddy IPO won’t be quite as pricey, with GDDY stock being valued at two times sales. But it will have to deal with what InvestorPlace IPO guru Tom Taulli calls GoDaddy’s biggest problem: fierce competition. In addition to the names above, Google Inc (NASDAQ:GOOG, NASDAQ:GOOGL) is working on its own domain name service and Silicon Valley giants like Microsoft Corporation (NASDAQ:MSFT) and Amazon.com, Inc. (NASDAQ:AMZN) could easily hop in the game as they look for more verticals to dominate.
Bottom Line
I applaud GoDaddy for being a market leader and for continuing to grow its sales at an impressive clip.
But while the GoDaddy IPO price isn’t flat-out outrageous, I’m still hesitant to buy stock in a company that, right off the bat, loses money and faces an intimidating lineup of tech giants as potential competitors.
As of this writing, John Divine held shares of GOOG stock and GOOGL stock. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
