On Wednesday, Piper Sandler expressed confidence in Squarespace's (NYSE: SQSP) growth trajectory by increasing the company's stock price target to $45 from the previous $40, while maintaining an Overweight rating.
The firm's assessment follows Squarespace's recent performance, noting that despite a slight dip in organic growth to 13% this quarter compared to an estimated 16% in the previous quarter, the 12% rise in new website subscriptions is a strong indicator of the company's ongoing organic growth potential.
Squarespace's initial forecast for fiscal year 2024 had suggested high single-digit organic growth, but with a $20 million increase announced today, the firm now anticipates the company to achieve double-digit organic growth throughout the year.
Piper Sandler's stance reflects a positive outlook on Squarespace's valuation, citing the potential for a low-double-digit compound annual growth rate (CAGR) over the medium term, coupled with a modest expansion in free cash flow (FCF) margins.
The analyst at the firm emphasized the attractiveness of Squarespace's shares, considering the expected growth and margin improvements. The raised stock price target to $45 and reiterated Overweight rating are based on these factors.
Squarespace is scheduled to host an investor session on May 15, 2024, at the company's New York offices. This event is anticipated to provide significant updates on the company's financial targets. Among the most crucial updates, Piper Sandler is particularly interested in the medium-term unlevered free cash flow (uFCF) margins or equivalent financial metrics.
Investors and analysts alike will be watching closely for the outcomes of the upcoming investor session, as it could provide further insights into Squarespace's financial strategy and growth expectations.
InvestingPro Insights
As Squarespace (NYSE: SQSP) continues to make headlines with its growth expectations and Piper Sandler's increased price target, real-time data and insights from InvestingPro offer additional context for investors.
With a market capitalization of $5.07 billion and a notable gross profit margin of 76.78% in the last twelve months as of Q1 2024, Squarespace's financial health appears robust. The company's revenue growth also remains strong, with an increase of 17.88% over the same period, underscoring the company's potential for sustaining organic growth.
InvestingPro Tips highlight several key factors for consideration: Squarespace's net income is expected to grow this year, and analysts have taken note of the company's impressive gross profit margins. Still, it is also important to be aware that four analysts have revised their earnings downwards for the upcoming period, which could signal caution. Furthermore, the company has experienced a significant return over the last week, reflecting investor confidence in its short-term performance.
For those looking to delve deeper into Squarespace's financials and future prospects, InvestingPro offers additional tips and insights. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and gain access to a wealth of information, including 13 more InvestingPro Tips, to inform your investment decisions.
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