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In this piece, I evaluated two website-builder stocks, Squarespace (NYSE:SQSP) and GoDaddy (NYSE:GDDY), using TipRanks’ comparison tool to determine which is better. Squarespace is a content management system that allows subscribers to create a website, host their content, register their own domain name, sell products, track their website’s analytics, and more. Similarly, GoDaddy acts as a web host, website builder, website services provider, and domain registrar.
Squarespace shares are up 29% year-to-date and 31% over the last year, while GoDaddy is up just 1% year-to-date and 2% over the past year.
With Squarespace rallying so much this year while GoDaddy is just barely in the green, it may come as a surprise that Squarespace is the one that’s losing money as GoDaddy turns a profit. However, a closer look provides some answers.
Since Squarespace is unprofitable, we’ll look at the companies’ price-to-sales (P/S) ratios to gauge their valuations against each other and that of their industry. For comparison, the U.S. application software industry is trading at a P/S of 7.7 versus its three-year average of 9.9.
Squarespace (NYSE:SQSP)
At a P/S of 4.3, Squarespace is trading at a sizable discount to its industry. Its lack of profitability does suggest a discount is in order, although the size of that discount could be debated. However, a mixed picture consisting of some critical questions suggests a neutral view might be appropriate.
First, there is the issue of profitability. A consensus of 16 analysts suggests Squarespace could become profitable again, recording a net income of $49 million for the full year. However, that would require a big turnaround, as its losses on a trailing-12-month basis stand at around $220 million.
Nevertheless, Squarespace’s earnings reports suggest a full-year profit might be possible this year. The company reported net income of $502,000 for the March quarter and $3.66 million for…
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