Squarespace Earnings: Pricing Upside and Resilient Retention Drive Strong Start to Fiscal 2023

We raise our fair value estimate for no-moat Squarespace 15% to $22.50 following a stellar start to fiscal 2023, which exceeded our expectations. During the quarter, Squarespace benefited from resilient customer retention despite the continued rollout of like-for-like price increases, greater uptake of higher value solutions, and record customer trials, suggesting potential countercyclical demand for website design software. Following the result, we have lifted our fiscal 2023 and medium-term assumptions for top-line growth and profitability. However, at current prices, Squarespace shares continue to screen as overvalued, trading at a hefty 22% premium to our updated fair value estimate.