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GoDaddy shares slide as Citi sees valuation troubles

#10 GoDaddy Chevrolet makes contact with the #38 Jerry Cook Hall of Fame Tribute Ford, during a NASCAR race in Martinsville, Virginia.
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#10 GoDaddy Chevrolet makes contact with the #38 Jerry Cook Hall of Fame Tribute Ford, during a NASCAR race in Martinsville, Virginia.

GoDaddy's stock fell about 2 percent Tuesday after Citi analysts downgraded the stock, citing its valuation.

Citi lowered its GoDaddy rating to "neutral" from "buy, noting that the stock was trading within 4 percent of $34, "a level which it has been unable to hold in previous trading."

"Our 10-year [discounted cash flow] analysis, which assumes roughly 100bps of margin expansion per [year] and 1mn+ net customer additions through 2021, yields a $35 price target," they said in Tuesday note to clients.

"Considering these assumptions are in-line with the margin expansion (140bp) and customer growth (+1.1mn) seen in 2015, we see limited upside on a fundamental basis from current levels. Lastly, shares now trade at 13.2x our 2017 EBITDA estimate, a premium to GDDY's comp group," they said.

GoDaddy shares are virtually flat for the year, but have advanced more than 12 percent over the past 12 months.

GDDY 12-month chartSource: FactSet

Disclosure: Citi has received compensation from GoDaddy for investment banking services.