Squarespace’s Hold Rating Balances Solid Q1 Performance With Financial Caution

Analyst Siti Panigrahi from Mizuho Securities maintained a Hold rating on Squarespace (SQSP – Research Report) and keeping the price target at $34.00.

Siti Panigrahi has given his Hold rating due to a combination of factors including Squarespace’s solid Q1 performance and the potential growth opportunities ahead. The company exceeded revenue expectations with a notable year-over-year increase, driven by strong subscriber growth, particularly from the benefits of a Google partnership and legacy price hikes. Furthermore, Squarespace’s acquisition of Google Domains assets significantly contributed to its revenue stream. Despite these positives, the company’s margins faced pressures, which is indicative of some financial caution moving forward.
Additionally, the analyst acknowledges Squarespace’s ability to leverage pricing as a modest tailwind to its financials. The company has seen benefits from residual legacy pricing increases and has implemented higher list prices on select plans, suggesting the likelihood of further pricing advantages in the fiscal year ahead. However, these positive considerations seem to be tempered by the upfront costs associated with domain acquisitions and a lower than expected adjusted EBITDA, leading to the Hold rating as an indication of a balanced outlook on the stock’s potential for both growth and risk.

In another report released on May 8, Barclays also maintained a Hold rating on the stock with a $40.00 price target.

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Squarespace (SQSP) Company Description:

Squarespace Inc is an all-in-one platform for businesses and independent creators to build an online presence, grow their brands and manage their businesses across the internet. It offers websites, domains, e-commerce, tools for managing a social media presence, marketing tools, and scheduling capabilities. The company primarily derives revenue from monthly and annual subscriptions. Revenue is also derived from non-subscription services including fixed fees earned on revenue share arrangements with third parties and fixed transaction fees that it earns on sales made through customers’ websites.