On Thursday, Evercore ISI adjusted its outlook on HubSpot Inc (NYSE:HUBS) shares, lowering the price target to $550 from the previous $650 while maintaining an In Line rating.
HubSpot reported second-quarter revenues that surpassed expectations, with total revenue reaching $637 million, a 20% year-over-year increase. This performance exceeded the analyst's and consensus forecasts of $617 million and $619 million, respectively.
The company's subscription revenue showed a notable increase to $624 million, up by 20.5% and surpassing the forecast of $606 million. Additionally, billings grew by approximately 20% in both reported and constant currency terms, and operating margins were around 2 percentage points higher than estimated, at about 17%.
HubSpot's full-year 2024 revenue guidance was raised slightly, yet the updated guidance suggests a slowdown in the second half of the year, with an implied growth of around 15% for the fourth quarter.
Despite a conservative revision of the second-half guidance, the analyst indicated that HubSpot's new pricing strategy and strong customer growth, particularly at the Starter tier, are progressing well.
After three months of the new pricing model, the company's net revenue retention (NRR) increased for customers. This, along with the positive reception of AI-driven products like Content Hub, is expected to be a growth catalyst in calendar year 2025.
HubSpot's multi-hub adoption and net new customer additions, which increased by approximately 23% or 11.2k, were also highlighted as positive indicators.
The analyst concluded that while HubSpot is executing effectively in a challenging environment, investors might adopt a "wait and see" approach at the current levels. The revised price target of $550 is based on approximately 9 times the enterprise value to the calendar year 2025 revenue estimate.
In other recent news, HubSpot Inc. has seen a series of noteworthy developments. The company reported a 23% year-over-year revenue increase in Q1 2024, driven by solid subscription growth and the addition of over 11,700 new customers. However, a cautious buying environment and a slowdown in deal progression were observed.
KeyBanc upgraded HubSpot's stock from Underweight to Sector Weight, citing decreased execution risks and revised growth expectations. Scotiabank reduced its price target for HubSpot shares to $650, maintaining a Sector Outperform rating, while Citi reaffirmed a Buy rating and $767.00 price target.
Wells Fargo (NYSE:WFC) maintained an Overweight rating and raised its shares target to $750, noting significant upsell opportunities due to recent pricing changes.
Despite the halted acquisition talks with Alphabet (NASDAQ:GOOGL), analysts believe the decrease in share value presents a buying opportunity. Recent product introductions like Content Hub, Service Hub, and HubSpot AI, along with a new pricing model based on seats, have stirred mixed reactions from analysts. These are some of the recent developments shaping HubSpot's trajectory.
InvestingPro Insights
As HubSpot Inc (NYSE:HUBS) navigates through a dynamic market landscape, real-time data from InvestingPro provides a nuanced view of the company's financial health and stock performance. With a market capitalization of $23.48 billion, HubSpot's significant gross profit margin of 84.24% over the last twelve months as of Q1 2024 underscores its efficient revenue conversion, aligning with Evercore ISI's recognition of the company's robust customer growth and successful pricing strategy.
However, the stock's volatility is reflected in its price movements, with a notable 21.4% decrease over the last month and a 26.71% decline over the last six months. This volatility is a critical consideration for investors contemplating the "wait and see" approach mentioned by Evercore ISI. Furthermore, while the company has not been profitable over the last twelve months, analysts predict a turnaround with profitability expected this year, as indicated by one of the InvestingPro Tips.
For investors seeking a deeper dive into HubSpot's financials and stock prospects, InvestingPro offers additional insights, including 13 more InvestingPro Tips available at https://www.investing.com/pro/HUBS. These tips provide valuable perspectives on the company's financial position and market expectations, such as HubSpot's impressive long-term returns and its current trading at a high revenue valuation multiple.
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