GoDaddy, Squarespace get Outperform ratings at Raymond James on AI benefit

Raymond James resumed coverage on several small-and mid-size businesses, including GoDaddy (NYSE:GDDY), Squarespace (SQSP) and Wix.com (WIX), in the internet space citing benefits of generative AI disruption.

A team of analysts led by Josh Beck said that the SMB internet space has been circled as a group exposed to GenAI disruption due to early consumer/prosumer text/image generation use cases, which they think has constrained multiples to a degree.

"However, as part of our SMB GenAI Underdog thesis, we actually believe that AI creates a net opportunity for the web tool platforms to incorporate GenAI technologies that should lessen the burden to create a web/commerce presence and structurally improve adoption curves," said Beck and his team in a research note.

The analysts believe GenAI creates an opening for these platforms to offer digital labor types of agents to effectively help human labor-constrained SMBs (often sole proprietors or maybe a handful of employees) to add customer-facing capabilities such as support/sales based on rich customer data sets, in addition to offering potential cost efficiency gains not embedded in long-term margin targets to better serve customers which are generally in the millions.

GoDaddy (GDDY): Raymond James resumed coverage of GoDaddy with a Strong Buy rating and assigned a $150 price target.

The analysts said that their "SMB GenAI Tailwind" thesis is based on GoDaddy using the innovative Airo GenAI stack to effectively lower adoption hurdles from products beyond core domains such as logo creation, presence, commerce/Gross payments volume, or GPV, that should lead to a rising mix of two plus product customers.

Over time, the analysts said, they believe GoDaddy could effectively "outsource" customer care expertise and deep data set to produce a more autonomous SMB agent to help respond to customer requests and generate a meaningfully autonomous Software as a Service, or SaaS, component.

Squarespace (SQSP): The firm resumed coverage of Squarespace with an Outperform rating and set a $40 price target on the shares. Beck and his team expect Squarespace payments uptake to exceed expectations and create a multi-year growth tailwind.

Wix.com (WIX): The analysts resumed coverage on Wix with an Outperform rating and a $160 price target. They see a multi-year tailwind forming on the back of the Wix Studio launch (more than 500K accounts in about six months) to drive a higher mix of agencies/developers.

LegalZoom.com (LZ): The analysts resumed coverage on LegalZoom at Market Perform, noting that their optimism on the management team's strategy to leverage its unique early funnel signals to x-sell financial products is tempered by an uneven formation macro and limited subscription bookings visibility.

ZipRecruiter (ZIP): For ZipRecruiter, the analysts resumed coverage at Market Perform as their belief in the strategy to pivot upmarket is contrasted by an uneven job market that they expect to continue to be exposed to the "big stay" (employees tending to stay put), employee dynamic.

Yelp (YELP): Raymond James has started covered on Yelp with a Market Perform rating as its endorsement of the home services strategy is offset by broader restaurant spend weakness and a lack of visibility into search engine marketing (though the analysts like the push to effectively take on greater traffic ownership) spend returns.

GoDaddy (GDDY) has a Buy rating at Seeking Alpha's Quant Rating system, which consistently beats the market. Meanwhile, the Seeking Alpha authors' average rating is also Buy and so is the average Wall Street analysts' rating, Buy.