Squarespace share price: can it rally more?
- Squarespace Inc (NYSE: SQSP) share price reaches US $ 54.82 per share
- The stock’s performance is a 25.6% improvement from its dismal start
- Rising R&D spending could lead to sluggish profits, analyst says
- Buy and Sell Squarespace Shares with an IG Account
Squarespace share price: what’s the latest?
Newly listed Squarespace, which helps businesses and individuals build and manage their websites, fell 0.2% to close at US $ 54.82 on Thursday, trading close to 200,000 shares.
On Monday (May 24, 2021), the counter jumped 9.6% overnight to end at US $ 54.30. This is the first time it has closed above the benchmark price of US $ 50 awarded by the exchange.
SQSP stock then rose 0.4% on Tuesday and 0.8% on Wednesday.
From its first day closing price of US $ 43.65 per share, the stock has risen 25.6% and is almost 10% higher than the benchmark price.
SQSP stock got off to a poor start last Wednesday (May 19, 2021) via direct listing. As the website creation and hosting company continued with listing plans despite a broader market sell-off, its valuation fell by a third from what it was in March, Reuters reported.
Immediately after listing, Squarespace founder and CEO Anthony Casalena maintained 68% voting control due to a two-class share structure, Bloomberg reported. At the time, he owned more than three-quarters of the Class B shares, which carried 10 times the voting rights of the Class A shares.
Why aren’t some analysts impressed with Squarespace?
In addition to its website building services, Squarespace also sells e-commerce tools, including those that help users sell products online and manage customer relationships through email campaigns.
The Covid-19 pandemic has given New York-based Squarespace a boost as a large number of small businesses rushed to establish an online presence to reach their home customers, Bloomberg noted.
Total revenue thus increased by 28% year-on-year to reach US $ 621 million in 2020. However, net profit fell by 47%, which the company attributed to the company. increased marketing costs.
As the website development company aims to aggressively expand into new areas, this could again lead to higher operating costs, which could lead to a lack of short-term profit improvement despite growing higher sales, said analyst Douglas Kim, who posts on Smartkarma.
“It appears the company intends to spend more on R&D (research and development) and marketing to achieve scale, which could have a further negative impact on profit margins,” Kim said.
He also noted that the website hosting service’s competitors – including Wix.com, BigCommerce Holdings, Shopify and GoDaddy – generated an average 40.6% year-over-year sales growth in 2020, higher than Squarespace’s sales growth of 28.1%.
Going forward, a major investment concern would be the deterioration of Squarespace’s operating margins, Kim said.
A recent comment from Forbes noted that while Squarespace’s large total addressable market can attract growing investors, that doesn’t necessarily translate into big profits, as the company has to spend a lot to attract users given the ` “ intense competition ” in the sector.
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