On Thursday, Evercore ISI reiterated its In Line rating and a $550.00 price target for HubSpot Inc (NYSE:HUBS), following the company's Inbound conference and Analyst Day in Boston.
The event showcased HubSpot's new AI platform, Breeze, which includes various AI-driven features such as copilots, Agents, and Breeze Intelligence for data enrichment. The company plans to integrate AI across its entire platform, anticipating value capture as customers upgrade to higher-tier editions where full functionality is available.
HubSpot's Breeze Intelligence will offer 'capacity packs' for purchase, which customers can use as needed in increments of 100, 1k, or 10k. Financial highlights from the event include HubSpot's long-term operating margin target, which has been increased to 25% from the prior 20-25% range. The company also set a fiscal year 2027 operating margin target of 20-22%, up from the 18-20% target for fiscal year 2026.
The firm noted that while the update on margins was relatively minor, it reflects management's commitment to improving efficiency at scale. The FY27 target is seen as a new benchmark to gauge HubSpot's progress.
The main concern for investors is identifying when a recovery in subscription growth and net revenue retention might occur, and whether the new AI features will drive more customers to upgrade to higher-end offerings.
Evercore ISI believes that while the debate over the company's subscription growth and net revenue retention may continue into early calendar year 2025, the reduced risk in second-half estimates and the solid increase in operating margins suggest limited downside risk for the stock, barring a broader downturn in the software sector.
In other recent news, HubSpot Inc. has been making significant strides in incorporating artificial intelligence (AI) into its strategies, as indicated by its recent unveiling of a suite of AI-powered tools and updates to its customer platform.
This development was announced during the company's Fall 2024 Spotlight at INBOUND. The suite includes Breeze, an AI designed to streamline customer engagement across marketing, sales, and service teams, and Breeze Intelligence, which focuses on data enrichment and buyer intent.
In terms of financial performance, HubSpot's Q2 2024 earnings call reported a 21% increase in revenue year-over-year, with the addition of over 11,200 net new customers, bringing the total to 228,000. Despite a slight decrease in average subscription revenue per customer, the company's strategic shift towards an AI-powered customer platform has contributed to a positive outlook.
In other updates, HubSpot's Chief Marketing Officer, Kipp Bodnar, was recently appointed to the Board of Directors of Similarweb (NYSE:SMWB) Ltd., a move expected to enhance Similarweb's expertise in scaling SaaS businesses and driving customer engagement globally.
On the analyst front, BMO Capital, Canaccord Genuity, and Oppenheimer have all maintained positive ratings on HubSpot, with BMO Capital and Oppenheimer highlighting the company's AI initiatives and Canaccord Genuity emphasizing the company's potential to achieve Rule of 40+ performance.
InvestingPro Insights
As HubSpot Inc (NYSE:HUBS) continues to integrate AI across its platform, the financial community is closely watching its performance metrics. According to InvestingPro data, HubSpot boasts an impressive gross profit margin of 84.51% as of the last twelve months leading up to Q2 2024, underlining the company's ability to maintain high levels of efficiency in its operations. Despite not being profitable over the last twelve months, with a P/E ratio of -707.52, analysts are optimistic, as reflected in the InvestingPro Tips, predicting that the company will reach profitability this year.
Investors should note the company's significant revenue growth of 23.13% over the last twelve months leading up to Q2 2024, a testament to its expanding market presence. However, the stock price has experienced considerable volatility, with a 6-month total price return of -17.78%, indicating that investors may need to brace for short-term fluctuations. For those considering the long-term perspective, it's worth mentioning that HubSpot has delivered a strong return over the last decade, and with a current market capitalization of $25.87 billion, it remains a substantial player in the software sector.
For more detailed analysis and additional InvestingPro Tips on HubSpot, which can help investors navigate the company's growth prospects and current valuation, visit https://www.investing.com/pro/HUBS. The platform offers a total of 11 InvestingPro Tips, providing a comprehensive outlook for informed investment decisions.
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