Key insights
- The author speculates GoDaddy is optimizing for a sale, either to private equity or as an AI data acquisition target for a company like Microsoft. Evidence includes price hikes driving revenue, aggressive share repurchases, focus on EBITDA margins, and insider selling. However, the author's negative view of GoDaddy's marketing and identity crisis tempers the bullish acquisition thesis.
Have a theory for something I am working on and the feedback I'm looking is not on the theory itself but on which of the 2 paths seem the most likely based on findings and/or if it means anything for you in terms of value investing.
GoDaddy is currently polishing the books imo. Despite the stock being down (-28%ytd, -51% 1Y), they are hitting efficiency metrics that make me believe the board is optimizing for a sale dressed up as long term growth.
But is it an exit to private equity or an AI acquisition strategic play?
Some of the clean up efforts I'm referring to: Revenue up but its almost entirely price hikes as they have shifted focus from user acquisition. ARPU is climbing while customer growth is pretty much flat.
Aggressive share repurchases are inflating EPS and consolidating ownership. Classic pre exit but can be explained away in the interim.
Management is locked in on EBITDA margins and FCF, prioritizing lean P&L over market share. Perfect leveraged buyout candidate for PE.
Insiders have sold millions consistently (through scheduled sales) but I don't see a rush to buy any shares at these "discounted" levels.
Activists already involved ads a bit of pressure. Starboard has been involved for years making requests for these exact margin improvements.
They also have a bit of an identity crisis imo. The current Airo AI ads with Walton Goggins constantly remind users "its like you aren't a fraud." I know marketing pros like to say this is gap bridging but it honestly reminds me of the whole incompetence humor that Discover was running with the Jen Coolidge ads that were ironically running while Discover was facing questions about their own competence. When infrastructure brands joke about customer incompetence while facing their own credibility questions, it tells me the board has lost its way.
So which is it, if any:
Private Equity or become a massive data acquisition for a company like MSFT?