On Wednesday, Raymond James resumed coverage on Squarespace (NYSE: SQSP), initiating an Outperform rating with a $40 price target.
The firm's analysis suggests that the company's valuation is based on 16.3 times its estimated 2025 earnings before interest, taxes, depreciation, and amortization (EBITDA) or 5.5 times its 2025 enterprise value to gross profit (EV/GP), which is generally below that of its small and medium business (SMB) and commerce software peers.
The analyst believes that Squarespace is well-positioned in a stable web services environment, with generative artificial intelligence (GenAI) presenting more opportunities for creative and cost-saving measures in the near term (NT) and medium term (MT). The integration of seamless creation features, such as text and templates, is expected to add value to the platform.
Squarespace's growth outlook is further supported by the potential for credible growth opportunities linked to the recent rollout of Squarespace payments, which began in early 2024.
The analyst also references cross-selling and traffic synergies stemming from the acquisition of Google (NASDAQ:GOOGL) domains, with a significant conversion wave anticipated in 2024.
Additionally, there is an expectation of further pricing optimization in the second half of 2024, which could enhance the company's growth trajectory and margin prospects.
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