Squarespace (SQSP) Shares Skyrocket, What You Need To Know

Jabin Bastian /
2023/06/16 9:25 am EDT

What Happened:

Shares of website and ecommerce tools provider Squarespace (NYSE:SQSP) jumped 7.8% in the after-market session after the company announced that it has agreed to acquire the assets associated with the Google Domains business, which includes about 10 million domains. As context, market leader GoDaddy (GDDY) had nearly 84 million domains under management at the end of 2022, and according to VeriSign, the largest industry registrar, there are roughly 350 million domains worldwide. This means Squarespace's deal represents almost 3% of the worldwide domains. It also is a positive from a competitive standpoint, as there was always worry that Google could use its scale and financial resources to suddenly invest in and dominate the domain market. Squarespace company will provide a smooth transition for customers and keep the same renewal prices for at least a year after the deal. Squarespace will also be the only domain provider for customers who buy a domain with their Workspace subscription from Google for at least three years. The deal is expected to close in the third quarter of 2023 and is anticipated to have significant long-term benefits for Squarespace in terms of revenue and free cash flow.

What is the market telling us:

Squarespace's shares are not very volatile than the market average and over the last year have had only 27 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business. The previous big move was about one month ago, when the stock gained 8.1% on the news that the company delivered an impressive "beat and raise" quarter, with Q1 results exceeding analysts' revenue and earnings per share estimates. However, free cash flow and gross margin missed. Despite this, revenue guidance for the next quarter came in above Consensus, and the company lifted the full-year revenue outlook. Overall, it was a strong quarter for the company despite e-commerce companies reporting mixed earnings thus far.

Squarespace is up 47.1% since the beginning of the year. Investors who bought $1,000 worth of Squarespace's shares at the IPO in May 2021 would now be looking at an investment worth $767.47.

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