Earnings Miss: Squarespace, Inc. Missed EPS By 77% And Analysts Are Revising Their Forecasts

Squarespace, Inc. (NYSE:SQSP) shareholders are probably feeling a little disappointed, since its shares fell 4.3% to US$31.50 in the week after its latest second-quarter results. It looks like a pretty bad result, all things considered. Although revenues of US$248m were in line with analyst predictions, statutory earnings fell badly short, missing estimates by 77% to hit US$0.03 per share. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

See our latest analysis for Squarespace

Taking into account the latest results, the current consensus from Squarespace's 16 analysts is for revenues of US$994.7m in 2023. This would reflect a modest 6.8% increase on its revenue over the past 12 months. Earnings are expected to improve, with Squarespace forecast to report a statutory profit of US$0.28 per share. In the lead-up to this report, the analysts had been modelling revenues of US$980.6m and earnings per share (EPS) of US$0.35 in 2023. So there's definitely been a decline in sentiment after the latest results, noting the pretty serious reduction to new EPS forecasts.

Despite cutting their earnings forecasts,the analysts have lifted their price target 7.0% to US$34.33, suggesting that these impacts are not expected to weigh on the stock's value in the long term. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Squarespace at US$40.00 per share, while the most bearish prices it at US$25.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We can infer from the latest estimates that forecasts expect a continuation of Squarespace'shistorical trends, as the 14% annualised revenue growth to the end of 2023 is roughly in line with the 12% annual growth over the past year. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 9.6% per year. So it's pretty clear that Squarespace is forecast to grow substantially faster than its industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Squarespace. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Squarespace going out to 2025, and you can see them free on our platform here..

And what about risks? Every company has them, and we've spotted 2 warning signs for Squarespace (of which 1 is significant!) you should know about.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.