On Tuesday, Citi maintained its positive stance on HubSpot Inc (NYSE:HUBS), raising its price target to $708.00 from the previous $629.00 while retaining a Buy rating. After evaluating partner performances and market feedback, the revision reflects a more constructive view.
According to channel checks for the third quarter of 2024, HubSpot, known for its cloud-based marketing, sales, and customer service software, has been observed to perform in line with or above plan.
The firm's partners indicated strong large-deal momentum and positive demand implications following recent pricing changes. These factors contribute to anticipating a third-quarter earnings beat, which is expected to align with historical levels of around 4%.
The positive performance is likely to influence the full-year 2024 guidance. Despite the price target increase, Citi's estimates for HubSpot remain largely unchanged. The new target price implies a 10.5x multiple on the company's expected 2026 enterprise value-to-sales ratio. This adjustment is part of Citi's valuation framework, which is periodically updated to reflect market conditions.
HubSpot is viewed by Citi as one of the top mid-cap growth stocks for the year 2025, citing several tailwinds that could benefit the company. These include the transition of pricing from a headwind to a tailwind, momentum from new products, and the potential flexibility in addressing small to medium-sized businesses and interest rate changes.
Citi also recognizes HubSpot's strategic decisions aimed at fostering long-term growth, such as increasing the variety of units and stock-keeping units (SKUs) offered. This strategy is seen as positioning HubSpot favorably for a potential growth acceleration in the future.
In other recent news, HubSpot Inc. has seen a series of positive developments. The company's earnings and revenue have been strong, leading to BofA Securities and Stifel Financial Corp (NYSE:SF). increasing their price targets for the company.
HubSpot also recently acquired Cacheflow, a B2B subscription billing management specialist, a move that aims to enhance the company's Commerce Hub offering and streamline the quote-to-cash process for businesses.
Analyst firms such as Goldman Sachs (NYSE:GS), Scotiabank, and TD Cowen have maintained positive ratings on HubSpot's stock, emphasizing the potential for margin and revenue growth. They also highlighted the company's efforts in integrating artificial intelligence throughout its platform and its strategic focus on customer expansion.
HubSpot has updated its fiscal year 2027 operating margin target to 20%-22% and set a solid 25% as its long-term operating margin expectation. Furthermore, the company has introduced Breeze AI, a suite that includes AI agents, copilots, and Breeze Intelligence, emphasizing its commitment to enhancing user experience and efficiency.
These are the recent developments in HubSpot's business operations.
InvestingPro Insights
To complement Citi's bullish outlook on HubSpot Inc (NYSE:HUBS), recent data from InvestingPro provides additional context to the company's financial performance and market position. HubSpot's revenue growth remains strong, with a 23.13% increase over the last twelve months as of Q2 2024, reaching $2.39 billion. This aligns with Citi's observations of the company performing at or above expectations.
InvestingPro Tips highlight HubSpot's impressive gross profit margins, which are reflected in the data showing a gross profit margin of 84.51% for the same period. This robust profitability at the gross level supports the company's ability to invest in growth initiatives and new product development, as mentioned in Citi's analysis.
While HubSpot is currently not profitable over the last twelve months, with an operating income margin of -3.61%, InvestingPro Tips suggest that net income is expected to grow this year. This expectation correlates with Citi's anticipation of a potential earnings beat in the upcoming quarter.
The stock's strong return over the last three months, with a price total return of 23.95%, indicates market confidence in HubSpot's strategy and growth prospects. This performance supports Citi's view of HubSpot as a top mid-cap growth stock for 2025.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips for HubSpot, providing a deeper understanding of the company's financial health and market position.
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