Here’s why Squarespace shares fell despite second-quarter earnings beating

Square space (SQSP) fell 3.1% on July 25 despite the company posting stunning second-quarter results. Investors were disappointed by revenue forecasts for fiscal 2022, which fell short of analysts’ expectations.

New York-based Squarespace Inc. is an all-in-one website building platform for businesses and freelancers. The company offers pre-made website templates that can be used to create and modify web pages to help clients establish an online presence, build their brands and manage their internet businesses.

SQSP Q2 numbers

On the positive side, earnings of $0.45 per share impressively exceeded analysts’ expectations of $0.09 per share and were higher than the reported loss of $3.22 per share for the period of the year. former.

Although revenue rose 9% year over year to $212.7 million, it was in line with consensus estimates of $212.01 million.

Commerce revenue increased 13% to $66.2 million, unique subscriptions increased 6% to 4.2 million, and average revenue per unique subscription (ARPUS) increased 6% to 204 usd.

SQSP’s revenue outlook is below expectations

Based on the current scenario, management provided financial forecasts for the third quarter and full fiscal year 2022, which were lower than analysts’ expectations.

The company expects fiscal 2022 revenue to grow 9% to 11% (in the range of $857 million to $867 million), which is lower than the consensus estimate of $873.61 billion. dollars.

For the third quarter, revenue is expected to increase 6% to 8% (in the range of $213 million to $218 million), compared to the consensus estimate of $221.58 million.

Comments from the CEO of SQSP

Squarespace CEO Anthony Casalena commented, “Our recent launch of Fluid Engine, a key enhancement to our page building experience, represents a major step forward in no-code web design for professionals and beginners alike and we’re thrilled. that it is now available to customers. worldwide.

The Wall Street perspective SQSP

Following the second quarter results, JMP Securities analyst Andrew Boone reiterated a Hold rating on the stock.

Disappointed with the muted revenue forecast, Boone warned that they may have to cut their mid-teen growth estimates for 2023 due to signs of slowing revenue growth implicit in the outlook provided by the direction.

However, the rest of the Wall Street community is cautiously bullish on the stock, with a moderate buy consensus rating based on five buys and six holds. Squarespace’s average price target of $27 implies 39.75% upside potential from current levels.

Bloggers give their opinion SQSP

Data from TipRanks shows that financial bloggers’ opinions are 100% bullish on SQSP shares, against an industry average of 65%.

Final Thoughts

Squarespace shares have lost more than 65% of their market capitalization over the past year, dramatically underperforming benchmarks.

Currency headwinds clearly weighed on quarterly results, as noted by senior management. Investors may wait for better visibility on revenue growth before taking a position on the stock.

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