Bank Of America Raises HubSpot Price Target After Positive Channel Checks - HubSpot (NYSE:HUBS)

HubSpot Inc HUBS could report healthy bookings growth and is likely to generate robust free cash flows in the long term, driven by sales productivity and ASP growth, according to one analyst.

The Analyst

Bank of America’s Brad Sills maintains a Buy rating on HubSpot, raising the price target from $180 to $185.

The Thesis

Talks with key ad agency and reseller partners indicate Q4 new account signings were in-line with or ahead of expectations. Channel checks didn’t suggest any macro weakness in North America or Europe, Sills said.

Agencies are beginning to sign onto HubSpot larger customers with 500 to 2,000 employees. Checks also indicate a slight increase in Enterprise upgrade activity ahead of the price increase. Sales Pro cross selling activity seems to have grown, backed by feature enhancements and partner experience.

Even conservative customer additions of 3,700 in Q4 suggests customer growth of 38 percent year over year. Sills expects 36-38 percent year-over-year subscription growth in Q4, which is higher the prior estimate of 32 percent.

“Partners noted that pipelines are strong for Q1 and 2019, driven by similar trends,” the analyst wrote in the note.

Looking at long-term FCF potential, HubSpot could achieve a CAGR of 54 percent, driven by sales productivity and ASP growth. In upside case, the estimate reaches 63 percent CAGR.

Price Action

Shares of HubSpot traded at $151.65 Wednesday afternoon.