On Monday, Piper Sandler reiterated a Neutral rating on Squarespace (NYSE:SQSP) with a steady price target of $44.00. The firm's analyst provided insights on the ongoing discussions regarding the proposed acquisition of Squarespace by Permira, a private equity firm. The commentary addressed investor concerns and evaluated the fairness of the offer price in light of Squarespace's projected value.
The analyst elaborated on the potential pushback against the $44 deal price, citing that the projected financial figures suggest a fair value of $53 for Squarespace. This estimate is based on an industry-informed scenario that assumes the company prioritizes profitability, a strategy not yet fully embraced or communicated to investors. The analysis suggests that achieving this level of profitability is feasible, considering similar progress observed among Squarespace's industry peers.
Despite the argument for a higher valuation, the analyst expressed the belief that shareholders are more inclined to approve the current offer. The rationale behind this is the significant upside presented by the deal, which may outweigh the risks of jeopardizing the entire transaction. Additionally, the composition of the largest shareholders in Squarespace is seen as a factor likely to influence the deal's approval.
The acquisition proposal has sparked a conversation among investors and analysts, weighing the benefits of accepting the $44 offer against the potential for a higher valuation. The analyst's comments provide a snapshot of the current sentiment and the strategic considerations that may guide the decision-making process for Squarespace's shareholders.
The deal's dynamics are under scrutiny as shareholders assess the long-term implications of the Permira acquisition. With the upcoming shareholder vote, the outcome remains contingent on various factors, including the company's valuation and shareholder interests. Piper Sandler's stance reflects a measured perspective on the transaction as it progresses towards a resolution.
In other recent news, Squarespace, Inc. has cleared a significant regulatory hurdle in its transaction with Permira Advisers LLC, moving one step closer to the completion of the merger. This development comes alongside Squarespace's recent divestiture of its subsidiary, Tock LLC, to American Express (NYSE:AXP) Travel Related Services Company, Inc. for $400 million, a move that represents a substantial cash infusion for the company.
In the realm of strategic acquisitions, Squarespace's purchase of Google (NASDAQ:GOOGL) Domains has driven subscription growth for the fourth consecutive quarter, contributing to the company's Q1 2024 financial results that exceeded expectations. These results, which saw revenue and unlevered free cash flow surpassing the high end of guidance, are among the recent developments that investors are closely monitoring.
In terms of analyst feedback, Squarespace's stock was downgraded from Buy to Neutral by B.Riley following the announcement of an all-cash acquisition proposal from Permira. This downgrade aligns with a similar action by JMP Securities, which downgraded the company from Market Outperform to Market Perform. In contrast, Mizuho upgraded Squarespace from Neutral to Buy, citing key growth drivers that are currently undervalued by the market.
InvestingPro Insights
As Squarespace (NYSE:SQSP) faces a pivotal moment with the acquisition proposal by Permira, real-time data and analysis from InvestingPro offer additional context for investors. With a current market capitalization of around $6 billion, Squarespace's financial health and growth prospects are under the microscope. Notably, the company has achieved a gross profit margin of 76.78% over the last twelve months as of Q1 2024, underscoring its ability to maintain impressive profitability in its core operations. Furthermore, recent data indicates a revenue growth of 17.88% during the same period, suggesting that the company is expanding at a healthy rate.
InvestingPro Tips highlight key factors such as Squarespace's expected net income growth this year and its strong gross profit margins. These insights may reinforce the argument for a higher valuation than the current offer price. Additionally, the company has seen a large price uptick over the last six months, with a 37.12% total return, which may influence shareholder sentiment as they consider the fairness of the acquisition price. On the flip side, it's worth noting that 7 analysts have revised their earnings downwards for the upcoming period, and the company is trading at a high EBITDA valuation multiple, which could be points of concern for investors.
Investors seeking a deeper analysis can find further InvestingPro Tips for Squarespace at https://www.investing.com/pro/SQSP. Additionally, those interested in a comprehensive investment tool can use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription. There are 13 additional InvestingPro Tips available, offering valuable insights into Squarespace's financial metrics and market position.
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