Mizuho analyst Siti Panigrahi upgraded Squarespace (NYSE:SQSP) to Buy from Neutral, raising the forecast to $50 from $34.

According to the analyst, the company can deliver a significant upside to consensus estimates. The upside scenario implies almost 22% year-over-year growth in 2024 (consensus at 19%). Squarespace also has potential for 20% year-over-year growth in 2025 (consensus at 14%).

The major growth levers underappreciated for Squarespace are – Google Domains asset acquisition and its halo effect driving new domains, pricing tailwind in 2025, and a modest contribution from Squarespace Payments.

Panigrahi emphasizes that these drivers will position the company for 20%+ growth with 30% uFCF margins over the medium term.

The Google Domains acquisition has already contributed $13 million of revenue in the first quarter alone.

In addition, management noted that Squarespace is seeing "greatly increased traffic" in new domains coming onto the platform due to the halo effect from the acquisition, with Google directing users directly to Squarespace for their domain needs, Panigrahi says.

The analyst estimates that the domains could contribute $93 million in revenue in 2024 and $153 million in 2025.

Panigrahi added that a pricing increase for Squarespace could generate a $35 million incremental revenue tailwind in 2025.

Squarespace recognizes payment revenues on a net basis and Payments could generate a modest $6 million revenue contribution in 2025.

The investor day next week could be a catalyst for shares to re-rate, the analyst notes.

After Squarespace's first quarter earnings reported earlier this week, the analyst raised FY24 revenue and uFCF estimates to $1.202 billion (19% Y/Y) and $307 million from $1.184 billion (17% Y/Y) and $296 million previously.

Price Action: SQSP shares are trading higher by 3.48% to $38.13 at last check Friday.

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