Analyst Note| Dan Romanoff, CPA |
Narrow-moat HubSpot reported another excellent quarter featuring significant upside to guidance and provided an outlook that was well ahead of expectations. We see accelerating revenue as a sign of the company’s strengthening position. Momentum from recent CMS hub and enterprise launches continues to build, while the starter suite also saw strong traction during the quarter. We do not see a blemish anywhere within results. Management pushed guidance nicely ahead of Street expectations for the year—but we still see upside potential, especially on profitability. We note that at the midpoint of revenue guidance for the year, HubSpot will be growing at approximately the same rate that Salesforce was at roughly the same size. We think the portfolio keeps getting stronger, which allows new customers to land at different solutions initially, even as they adopt additional hubs over time. After rolling our annual model forward and adjusting for quarterly strength and guidance, we are raising our fair value estimate to $390 per share, from $248. With shares quadrupling since the March 2020 lows, we find valuation challenging.