Oppenheimer Praises HubSpot's Execution, Downgrades On Valuation

Although HubSpot Inc HUBS is a great business with an excellent track record of execution, the stock is now trading at a significant premium to peers and already reflects the company’s future success, according to Oppenheimer.

HubSpot shares have appreciated around 225 percent since January 2017, versus an average gain of about 110 percent for the OpCo SaaS group and around 30 percent for the NASDAQ.

The Analyst

Oppenheimer’s Koji Ikeda downgraded HubSpot from Outperform to Perform and removed a $160 price target. 

The Thesis

HubSpot seems to be tracking toward strong Q4 results, but could face weakness in SMB demand in 2019, Ikeda said in the Thursday downgrade note. 

“Our recently published Annual IT Survey and SMB industry data from the NFIB suggest a potentially less certain and softening SMB buyer mindset in 2019, which slightly raises estimate risk, we think,” the analyst said. 

Software vendors have made huge investments in the customer engagement category, Ikeda said. Some have expanded their product portfolios, which compete directly with HubSpot.

Vendors like salesforce.com, inc. CRM are encroaching on HubSpot's target market, the analyst said, adding that these developments could impact customer acquisition and retention.

Price Action

HubSpot shares were trading down 1.61 percent at $149.57 at the time of publication Thursday. 

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