On Wednesday, Citi initiated a 30-day upside catalyst watch on Squarespace, Inc. (NYSE: SQSP), citing the company's strong performance and positive future outlook. Squarespace's recent financial results exceeded first-quarter expectations for 2024, and the firm has increased its full-year guidance for 2024, surpassing the initial estimates.
Squarespace's robust revenue and user Free Cash Flow (uFCF) were highlighted as key indicators of its strong quarter. The company's website subscriber growth stood at 12%, contributing to an overall unique subscriber growth of 15% year-over-year. Moreover, record-high website trial volumes were reported, further emphasizing the company's growth trajectory.
The company's strategic investments, particularly in the domain space, have begun to yield positive results. The acquisition of Google (NASDAQ:GOOGL) Domains has been noted to have a significant positive impact, enhancing Squarespace's visibility to potential new users. This move is expected to further strengthen the company's top of the sales funnel, an essential aspect of its business model.
Citi also pointed out multiple growth drivers for Squarespace, including its payments platform, international expansion, recent price increases, and the introduction of new AI products. These factors are anticipated to contribute to a continued positive momentum for the company, especially as it approaches its Investor Day on March 15, 2024.
Given these developments and Squarespace's fundamental performance, Citi finds the company's shares to be currently attractive, trading at approximately 15.5 times the firm's estimated 2025 Enterprise Value to user Free Cash Flow (EV/uFCF).
InvestingPro Insights
As Squarespace (NYSE: SQSP) garners attention with its recent financial triumphs and strategic initiatives, insights from InvestingPro further enrich the narrative of this burgeoning company. The company's market cap stands at a notable $5.07 billion, emphasizing its substantial presence in the industry. With a Gross Profit Margin for the last twelve months as of Q1 2024 at an impressive 76.78%, Squarespace demonstrates its ability to maintain profitability amidst its operating costs.
InvestingPro Tips highlight the company's expected net income growth this year and its commendable gross profit margins. These factors, coupled with a significant return over the last week of 7.84% and a robust three-month price total return of 16.3%, underscore the company's strong performance and potential for future growth.
For investors seeking a deeper dive into Squarespace's financial health and prospects, InvestingPro offers additional tips—13 in total, including insights on the company's debt levels, profitability forecasts, and valuation multiples. To explore these insights and more, visit https://www.investing.com/pro/SQSP and remember to use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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