Squarespace pops as William Blair sees 'low risk, high reward' for Google deal
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Squarespace (NYSE:SQSP) shares rose nearly 7% in pre-market trading on Friday as investment firm William Blair said it views the company's deal to buy Google's (NASDAQ:GOOG) (NASDAQ:GOOGL) domain business as "low risk, high reward."
Analyst Matthew Pfau, who has an outperform rating on Squarespace (SQSP) shares, said the $180M deal is valued at roughly 1 times revenue, given that the roughly 10M Google domains the company is buying start at $12 per year. There is also the potential for "significant cross-sell opportunities," Pfau added, if some of the domain holders convert to a website subscription.
"If only 2.5% of acquired customers convert to a website subscription, Squarespace would add over $50 million in annual recurring revenue based on Squarespaceâs 2022 ARPU ($209)," Pfau wrote in an investor note.
The analyst also noted that Squarespace (SQSP) will become the "exclusive domains provider" for customers who buy domains with a Google Workplace subscription from Google for at least three years, which could further boost subscriptions. 
"As a result, with limited downside and significant upside potential, we view the acquisitionâs risk/reward as quite favorable," Pfau added. 
GoDaddy (GDDY) and Wix.com (WIX), which both compete with Squarespace (SQSP), were little changed in pre-market trading.
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