Analyst Note| Dan Romanoff, CPA |
We are raising our fair value estimate for narrow-moat HubSpot to $580 per share from $525 after the company announced a bevy of new products and features along with updated financial metrics at its investor day. We view the introduction of payments as easily the most important announcement, but we see the new Operations Hub enterprise edition, along with other announcements, as providing additional revenue throughout our forecast. Management indicated net revenue retention has improved markedly and is now comfortable that the company can sustain approximately 110% going forward. These two factors, combined with a growing installed base for cross-selling, increasing multihub purchases, and the rise of HubSpot as a complete CRM platform, give us greater confidence in revenue growth. We have made minor adjustments to our margin assumptions to account for the introductions of the lower-gross-margin (but likely higher-operating-margin) payments solution. With the shares up as much as 14% intraday and flirting with $800, we note our model was near FactSet consensus for both revenue and operating income for 2022 heading into the investor day, and we therefore think the valuation is challenging here.