On Monday, Oppenheimer adjusted its stock price target for HubSpot Inc (NYSE: NYSE:HUBS), a leading developer and marketer of software products for inbound marketing and sales. The new price target is set at $625, down from the previous target of $725, while the firm maintains an Outperform rating on the stock.
The revision reflects a more cautious stance due to a combination of factors including mixed business indicators, the release of merger and acquisition (M&A) premium, and ongoing concerns that the headwinds faced in the first quarter may have persisted into the second quarter.
Despite these issues, there is an expectation of a slight top-line outperformance, albeit less than the 3-4%+ surprises seen in recent quarters, with billings anticipated to be in the high-teens range.
Oppenheimer anticipates that any top-line growth will contribute positively to the company’s margins. The firm also expects HubSpot’s full-year 2024 growth outlook, excluding foreign exchange impacts, to remain steady with only a modest improvement in margins, which should be sufficient to satisfy investors.
For the third quarter, the revenue outlook is projected to be slightly above the consensus, with earnings before interest and taxes (EBIT) margins expected to be in line with the second quarter.
Moreover, HubSpot’s website traffic showed a notable increase, accelerating by 4 percentage points quarter-over-quarter to a 10% year-over-year growth, outperforming the average decline of 4% among peers.
Oppenheimer estimates that foreign exchange will provide a minor tailwind to second-quarter revenue of approximately $0.5 million, or a 10 basis point improvement compared to the peer average year-over-year decline of 6 basis points.
The reduction in the price target to $625 reflects an adjustment for a lower expected multiple excluding M&A considerations. The firm's analysis indicates a cautious but still positive outlook for HubSpot's performance in the coming quarters.
In other recent news, HubSpot Inc. demonstrated solid financial growth in Q1 2024, reporting a 23% year-over-year revenue increase, driven by strong subscription growth and the addition of over 11,700 new customers.
Despite these positive results, the company noted a cautious buying environment and a slowdown in deal progression. Citi reaffirmed its Buy rating on HubSpot, viewing the recent decline in the company's share price as an overreaction. The firm anticipates HubSpot will benefit from several positive factors in the second half of the year, including product enhancements and favorable pricing dynamics.
Wells Fargo (NYSE:WFC) also maintained an Overweight rating on HubSpot and raised its shares target to $750, citing significant upsell opportunities due to recent pricing changes. These changes, including the removal of minimum seat requirements for HubSpot's Starter tier and the price increase for the Content Hub, are expected to increase revenue and customer engagement.
In the midst of these developments, there has been speculation about Google (NASDAQ:GOOGL)'s interest in acquiring HubSpot, which could potentially strengthen HubSpot's market position, although regulatory hurdles remain a significant unknown. These recent developments highlight the dynamic nature of HubSpot's trajectory in the SaaS industry.
InvestingPro Insights
As Oppenheimer revises its price target for HubSpot Inc (NYSE: HUBS), investors may find additional context through real-time data and analysis. The company's market capitalization stands at a robust $24.22 billion, reflecting its significant presence in the software industry.
With a gross profit margin of 84.24% over the last twelve months as of Q1 2024, HubSpot demonstrates an impressive ability to retain a large portion of its revenue as gross profit, aligning with Oppenheimer's recognition of potential for top-line growth.
While the firm's outlook remains cautious, HubSpot's stock price has shown volatility, with a 1-month total return decrease of 17.05%. This could indicate a potential entry point for investors, particularly as the stock is currently trading at 69.35% of its 52-week high. An InvestingPro Tip suggests that HubSpot's net income is expected to grow this year, providing a ray of hope for future profitability amidst the current challenges.
For those seeking a deeper dive into HubSpot's financial health and stock performance, additional InvestingPro Tips reveal that the company operates with a moderate level of debt and that its liquid assets exceed short-term obligations. These insights, combined with analysis from over 10 additional InvestingPro Tips available at Investing.com/pro/HUBS, can empower investors to make more informed decisions. To gain full access to these insights, use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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