Why GoDaddy Stock Withered on Wednesday
Key Points
He now feels the stock is a sell.
He's mostly concerned about the threat of AI disruption.
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Many investors chose not to go with GoDaddy (NYSE: GDDY) stock on Wednesday. One major factor in this was a recommendation downgrade from an analyst at a prominent American bank. On a day when the S&P 500 index essentially flat-lined, GoDaddy's stock sank by more than 4%.
Go sell, says analyst
The person pulling the lever on the GoDaddy downgrade was Wells Fargo's Alec Brondolo. Well before market open that morning, he changed his rating to underweight (sell, in other words) from his preceding equal weight (hold). He also knocked a few dollars off his price target; this is now $76 per share, from $80.
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In his updated take on GoDaddy, according to reports, Brondolo zeroed in on a general concern many investors have about veteran tech companies these days -- the potential for disruption by artificial intelligence (AI).
In his opinion, GoDaddy, the world's No. 1 domain registrar, has not properly adjusted its pricing in this era of AI-enhanced search. He pointed out that since AI overviews currently comprise 48% of all internet searches -- and often recommend cheaper registration services than GoDaddy's -- the company is likely to lose market share if it doesn't reduce its fees.
Domain dominance
If any company is identifiable as a domain registrar in the public's collective mind, it's GoDaddy. This might not be the most compelling niche in the tech industry, even with the company's success in upselling related services, but it has done fairly well in establishing and maintaining a lead in it.
I don't think its modest valuations reflect this, so if it does indeed react to the threat of AI disruption, I'd consider its stock a buy.
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Wells Fargo is an advertising partner of Motley Fool Money. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends GoDaddy. The Motley Fool has a disclosure policy.
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