Analysts Commend HubSpot's Growth, Product Momentum, Lift Price Targets After Q4 Print

HubSpot Inc HUBS, a cloud-based marketing and sales software platform, reported Tuesday after the close with forecast-beating fourth-quarter results and fairly positive Q2 and FY19 guidance.

The Analysts

  • Raymond James analyst Brian Peterson maintained an Outperform rating on HubSpot shares and raised the price target from $155 to $181.
  • Oppenheimer analyst Koji Ikeda maintained a Perform rating.
  • Bank of America Merrill Lynch analyst Brad Sills reiterated a Buy rating and increased the price target from $185 to $205.
  • Rosenblatt Securities analyst Marshall Senk reiterated a Buy rating and raised the price target to $182.

Raymond James Sees Attractive Long-Term Growth Story

HubSpot's execution on its platform strategy continued to impress, with new customer additions up 36 percent year-over-year and multiproduct deals almost doubling, Raymond James' Peterson said in a Tuesday note.

HubSpot's consistent outperformance — despite its game-changing product launches and significant international expansion efforts — is impressive, the analyst said.

Given the likelihood of multiple key products over the next three to five years and Raymond James' belief that SMB B2B is one of the largest white spaces for SaaS companies, the firm said HubSpot remains one of the most attractive long-term growth stories in its coverage universe.

The in-line 2019 revenue guidance might ultimately prove conservative, as HubSpot is in the habit of outperforming the initial outlook by 6-8 percent, Peterson said. 

See also: ServiceNow Soars After Strong Quarter

Oppenheimer: HubSpot A Great Business

The highlights of HubSpot's Q4 results include 30-percent-plus growth across total customers, billings, deferred revenue, subscription billings, subscription revenue and total revenue; solid operating margin improvements; and record free cash flow generation, said Oppenheimer's Ikeda.

Customer retention remained in the low-to-mid 80s, implying an "SMB-tilted installed base," the analyst said, adding that this market lacks a catalyst for boosting software spending in 2019.

Notwithstanding HubSpot's "great" business and strong management team, Ikeda said Oppenheimer is staying sidelined on the stock due to valuation, as the shares trade at a two-turn premium to the SaaS industry average.

BofA Forecasts Upside In 2019 

HubSpot's Q4 results suggest broad-based strength across a widening product suite, with multiproduct deals driving ASP and margin upside, said BofA's Sills.

The 2019 guidance that calls for 27-percent constant currency growth suggests little slowing in the metric, the analyst said. 

BofA expects a solid upside in 2019 thanks to the growing multi product momentum.

"Focus on the platform is likely to provide an additional opportunity for monetization, perhaps later this year," Sills said. 

Rosenblatt Raises Estimates 

HubSpot's strong close to the year and product cycle increased confidence in 2019, Rosenblatt's Senk said. The better-than-expected subscription line drove the EPS upside, the analyst said.

Rosenblatt raised its 2019 and 2020 estimates for HubSpot to reflect the strong new product offerings and the improved go-to-market plan.

The Price Action

HubSpot shares were up 0.16 percent at $172.28 at the time of publication Wednesday. 

Related Link: Now And Zen: Oppenheimer Waits For Better Entry Point In Zendesk

Photo by RebeccaChurt/Wikimedia. 

Posted In: Bank of America Merrill LynchBrad SillsBrian PetersonKoji IkedaMarshall SenkOppenheimerRaymond JamesRoseblatt SecuritesAnalyst ColorEarningsLong IdeasNewsGuidancePrice TargetReiterationAnalyst RatingsTrading Ideas