Morgan Stanley Initiates Coverage On HubSpot Inc.

Morgan Stanley initiated coverage on HubSpot, Inc. HUBS in a report issued Monday with an Equal-weight rating and $35 price target.

Analyst Jennifer Swanson Lowe observed that the company “is an emerging leader in Marketing Automation software with a highly differentiated solution and sizeable market opportunity ahead. We expect steady top-line growth and margin improvements going forward, but also see this priced in at current levels.”

“HUBS has grown revenue 45-50 percent in recent quarters and we expect strong growth to continue as the company adds new logos (11.6K customers today vs. >2.9M potential), grows average revenue per customer through tiered pricing and upsells (+17 percent YoY in Q214), and revenue retention remains healthy with potential to move higher (90 percent in Q214 vs. ~70 percent in CY11),” according to Lowe.

The report concluded that HubSpot “may not realize the hyper-growth shown by other SaaS leaders...given the challenges of creating a new category of spend. At the same time, shares already trade at 8.3x EV/CY15 Sales or 0.25x growth, roughly in line with peers, and we think the potential for additional multiple expansion may be limited in the near-term.”

HubSpot, Inc. recently traded at $35.79, up 0.45 percent.