HubSpot Inc PT Raised to $600 at Wolfe Research, 'AI Now, Pay Later'

HubSpot Inc PT Raised to $600 at Wolfe Research, 'AI Now, Pay Later'
(Updated - September 7, 2023 4:24 AM EDT)

Wolfe Research analyst raised the price target on HubSpot Inc (HUBS) to $600.00 (from $580.00) while maintaining a Outperform rating.

The analyst comments "HubSpot hosted its annual Analyst Day that once again emphasized the power of connection. However, this year, the focus was on connection through intelligence, as HubSpot announced several new Gen AI features that are expected to be embedded across the platform (drive value and take share near-term, extract value through monetization later). In addition to Gen AI announcements, HUBS also released a new Sales Hub, provided commentary that the company is landing larger (26% of new ARR from $3K+ MRR deals), and outlined how gross retention is expanding (at 87% vs. 84% in 2019), all of which should give investors confidence that management is executing on their vision. Unlike last year, where management surprised investors with underwhelming out year profitability commentary, this year management surprised with a mid-term FY26 op. margin target of 18%-20%, which will primarily be driven by leverage in S&M. As a result, we are taking our out-year op. margin estimates up slightly 15.6%/17.3% in FY24/FY25 (from 15.5%/16.5%). Overall, we see the key takeaways as: 1) HubSpot's opportunity is still in early innings (~4% market share in $51B TAM), 2) the company has mature Marketing ($1.3B ARR growing 20% Y/Y) and Sales ($600M ARR growing 30% Y/Y) businesses growing steadily, 3) Commerce Hub has the opportunity to add transaction-based revenue streams (not included in current TAM), and 4) Gen AI can upscale the platform, drive market share gains, and produce direct up-tiering and add-on monetization. While we continue to view HUBS as a rare example of a great markets, management, and margin story in our coverage, we walk away from the Analyst Day with even more conviction in HubSpot's strategy and vision for durable growth and profitability. We reiterate our outperform rating and raise our PT to $600 (from $580)"

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