Squarespace, Inc.'s (NYSE:SQSP) Profit Outlook

We feel now is a pretty good time to analyse Squarespace, Inc.'s (NYSE:SQSP) business as it appears the company may be on the cusp of a considerable accomplishment. Squarespace, Inc. operates platform for businesses and independent creators to build online presence, grow their brands, and manage their businesses across the internet. The company’s loss has recently broadened since it announced a US$253m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$491m, moving it further away from breakeven. Many investors are wondering about the rate at which Squarespace will turn a profit, with the big question being “when will the company breakeven?” In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

View our latest analysis for Squarespace

Consensus from 14 of the American IT analysts is that Squarespace is on the verge of breakeven. They expect the company to post a final loss in 2021, before turning a profit of US$26m in 2022. Therefore, the company is expected to breakeven just over a year from today. How fast will the company have to grow each year in order to reach the breakeven point by 2022? Working backwards from analyst estimates, it turns out that they expect the company to grow 74% year-on-year, on average, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.

earnings-per-share-growth

We're not going to go through company-specific developments for Squarespace given that this is a high-level summary, however, keep in mind that typically a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

One thing we would like to bring into light with Squarespace is it currently has negative equity on its balance sheet. This can sometimes arise from accounting methods used to deal with accumulated losses from prior years, which are viewed as liabilities carried forward until it cancels out in the future. These losses tend to occur only on paper, however, in other cases it can be forewarning.

Next Steps:

There are too many aspects of Squarespace to cover in one brief article, but the key fundamentals for the company can all be found in one place – Squarespace's company page on Simply Wall St. We've also put together a list of relevant factors you should further research:

1. Valuation: What is Squarespace worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether Squarespace is currently mispriced by the market.

2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Squarespace’s board and the CEO’s background.

3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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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.