Squarespace Earnings: Robust Subscription Growth as Firm Expands Domains Exposure

We raise our fair value estimate for no-moat Squarespace to $29.5 from $27.0 per share following a strong start to 2024 that surpassed our expectations. The firm posted impressive new subscription growth fueled by the expanding domain registration business and an ongoing referral partnership with Google. This strength came alongside healthy momentum in international markets, another record quarter of trial activity for core website design tools, and resilient retention. Following the result, we raise our long-term top-line growth and profitability assumptions on higher unique subscription growth and improved operating leverage. However, despite our improved valuation, we continue to view shares as overvalued on a risk adjusted basis.