Many investors chose not to go with GoDaddy (GDDY -4.26%) 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.
Image source: Getty Images.
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.
NYSE: GDDY
Key Data Points
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.
