On Friday, Citi has adjusted its outlook on HubSpot Inc (NYSE:HUBS) shares, reducing the price target to $629 from the previous $699, while retaining a Buy rating on the company's stock.
The move comes in response to the current volatile small and medium-sized business (SMB) and macroeconomic environment, despite HubSpot's second-quarter earnings showing signs of stabilization with a modest revenue surplus, similar to the first quarter's performance.
The company's second-quarter report revealed sustained low 20s growth in underlying billings, and while there was a modest increase to the full-year 2024 revenue guidance, the updated forecast effectively lowers expectations for the second half of the year.
This adjustment includes a $10 million foreign exchange benefit and takes into account the $19 million revenue beat in the second quarter. Despite these figures, the revised price target reflects the anticipation of ongoing macroeconomic uncertainty.
Citi notes that HubSpot has continued to effectively implement its new seats-based pricing model, which, along with other factors such as multi-hub adoption and a robust artificial intelligence roadmap, are expected to provide positive momentum as the company moves into 2025. These strategic initiatives are seen as key drivers for the company in the face of broader market pressures.
The revised price target of $629 implies a valuation of approximately 9 times the projected 2026 sales, which accounts for both the compression of peer group valuations and the impact of macroeconomic headwinds. Citi's stance on HubSpot remains positive, underscoring the company's execution and strategy in navigating the current business climate.
InvestingPro Insights
As investors weigh Citi's revised outlook on HubSpot Inc (NYSE:HUBS), real-time data from InvestingPro provides a more granular view of the company's financial health and market performance. With a market capitalization of $24.46 billion and a striking gross profit margin of 84.51% in the last twelve months as of Q2 2024, HubSpot demonstrates a robust ability to generate earnings relative to its revenues. However, the company's P/E ratio stands at a negative -641.38, reflecting its current lack of profitability.
InvestingPro Tips highlight that despite the stock's recent poor performance over the last month, with a price total return of -14.97%, analysts are optimistic about HubSpot's future, having revised their earnings upwards for the upcoming period. This optimism is also reflected in the expectation of net income growth this year. Additionally, HubSpot operates with a moderate level of debt, which may provide some financial flexibility in navigating uncertain economic conditions.
For those interested in deeper analysis, InvestingPro offers more tips on HubSpot, indicating potential areas of opportunity and risk for investors. Currently, InvestingPro includes 14 additional tips for HubSpot, which can be accessed for more informed decision-making.
As the market digests these insights alongside Citi's revised price target, understanding these real-time metrics and expert tips can offer a clearer picture of HubSpot's position in the volatile SMB sector. The InvestingPro platform provides a comprehensive suite of tools and data for investors looking to make the most informed decisions in this dynamic market landscape.
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