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Cantor Fitzgerald lowered its rating on HubSpot to underweight, a signal that it expects the stock to perform worse than the broader market. This move comes just after the company reported its latest quarterly results, which showed revenue growing at 17 percent.
While HubSpot is working to grow its profits by cutting costs and launching new AI tools, this downgrade suggests a concern that the current stock price may not be supported by its growth rate. The average target price across all analysts now sits at about $240.
Source: Cantor Fitzgerald
After HubSpot reported its November results, we cut our quality score to 3.7 and updated our ratings for how well the company is protected from competitors and how much profit it makes on its investments. We raised our expectations for profit margins but lowered our projection for how fast the company can add new customers. We added the impact of staff cuts and the new share buyback program to what we track. We also added a watch for how much of the profit comes from one-off tax benefits rather than software sales.
HubSpot brought in about 948 million dollars in revenue last quarter, which was slightly better than the 930 million dollars analysts expected. The company is also becoming more efficient, with its non-GAAP operating margin, a measure of how much profit is left after paying for the core business, rising to nearly 23 percent compared to about 20 percent a year ago.
This shift toward higher profitability is a key part of the company's transition from a fast-growing startup to a mature business. While revenue growth has slowed slightly from previous years, the company is successfully squeezing more profit out of every dollar it earns while continuing to grow its subscription base.
See the full quarter, and how our tracked metrics did
Source: 8-K filing
HubSpot is scheduled to release its latest quarterly numbers this afternoon. Analysts are looking for revenue of about 930 million dollars and earnings of 3.27 dollars per share. Beyond the headline numbers, the focus is on how well the company is moving customers over to its new seat-based pricing model. We are also watching for any early signs that its new AI tools, which automate tasks like lead scoring and content creation, are helping the company win larger business customers.
UBS lowered its price target for the software company to $265, down from the $310 target it set just last week. This adjustment comes as the average target across all analysts who follow the stock sits at $245. Price targets are estimates of where a stock might trade in the future, and they often move as analysts refine their expectations before a company reports its latest results. While the target is lower, it remains above the current stock price, and the firm did not change its overall rating on the business.
Source: UBS
Management has a perfect record of clearing its own bars, showing they set conservative targets they can reliably beat as the business matures.
| Expectation | |
|---|---|
| EPS | $4.11 |
| Revenue | $954M |