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HubSpot Hits the Right Spot
Stock Analysis & Ideas

HubSpot Hits the Right Spot

It would not be wrong to call HubSpot (HUBS) investors a happy lot, since the stock has more than doubled this year. It has crushed the Nasdaq composite index, driven by ongoing momentum in business amid steady economic recovery.

The customer relationship management (CRM) platform provider recently announced its Q3 financials, and there’s a lot to like about them. HubSpot continued to acquire customers rapidly, while its billings and average revenue per user (ARPU) remained strong. 

The company’s top line improved 49% year-over-year to $339.2 million, reflecting strong growth in subscription revenues. Total customers increased 34%, while ARPU registered a growth of 9%, closing a higher number of large deals in Q3 (up 81% year-over-year).

Furthermore, the company’s adjusted operating margin expanded 250 basis points in Q3. 

Adjusted net income jumped 88% year-over-year, due to higher revenues and operating leverage. 

To top it off, HubSpot raised its full-year revenue outlook, with the revenue forecast for FY 2021 in the range of $1.287 million to $1.289 million, against its earlier estimate of $1.268 million to $1.272 million. 

While HubSpot benefits from strength in the underlying business, its continued focus on expanding its total addressable market (TAM) through new offerings and product development supports my bullish outlook. 

Analyst Weighs in

Needham analyst Ryan MacDonald is also bullish on HubSpot. In response to the company’s quarterly results, MacDonald stated that HubSpot delivered strong Q3 numbers, wherein its billings handily surpassed expectations, despite tough year-over-year comparisons, coupled with the headwinds related to currency and lower billing duration. 

He added, “We came away most impressed with the acceleration in ARPU growth to 9% y/y, which was driven by an 81% increase in large deals.”

MacDonald maintained his Buy rating on HubSpot, with a price target of $870 (7.4% upside potential). His bullish outlook assumes a sustained 30%+ revenue growth in the coming years, due to new customer acquisitions and upselling opportunities. 

Along with MacDonald, the majority of the Street is also bullish on HubSpot, with a Strong Buy consensus rating, based on 18 Buys and four Holds. Furthermore, HubSpot scores an 8 out of 10 on TipRanks’ Smart Score rating system, indicating that the stock will likely outperform market averages.

See Top Smart Score stocks >>

The average HubSpot price target of $857.70 implies 5.5% upside potential to current levels.

Disclosure: On the date of publication, Amit Singh had no position in any of the companies discussed in this article.

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