HubSpot Earnings: Strong Quarter and Conservative Outlook With Early Signs of Demand Improvement

We are raising our fair value estimate to $720 per share from $640 after narrow-moat HubSpot reported strong fourth-quarter results that were ahead of our expectations on key items. We are also encouraged by management’s remarks regarding the improvement, however modest, in the demand environment for small and midsize businesses, or SMBs. After another quarter of meaningful upside, management once again guided conservatively. As a result, we tweaked our near-term estimates lower on the top line, while inching them higher on the bottom line. Overall, we moved our estimates to just above the high end of the ranges for the year, and we think even this approach will prove conservative given recent performance and the beginning of improving trends. We also increased our profitability assumptions over the next several years, which contributes to our higher fair value estimate. We think management has done a great job and HubSpot is well-positioned, but we assume investors are even more aggressive in their models than we are based on where the stock is trading, which we view as slightly overvalued.