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'Shine On You Crazy Diamond': Analysts Respond To HubSpot's Earnings

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Shares of HubSpot Inc (NYSE: HUBS) soared Friday after the company released a huge earnings beat for its fourth-quarter results and analysts raised price targets.

HubSpot’s revenue shot up 35% year-over-year coming in at $252.1 million, far ahead of the Street estimate of $236.7 million. Adjusted EPS came in at 44 cents beating the Street estimate of 23 cents.

The HubSpot Analysts: Morgan Stanley analyst Stan Zlotsky maintained an Overweight rating and increased the price target from $436 to $567.

Needham analyst Ryan McDonald reiterated a Buy rating and increased the price target from $400 to $520.

Piper Sander analyst Brent Bracelin maintained an Overweight rating and increased the price target from $488 to $600.

Raymond James analyst Brian Peterson upgraded the rating from Overweight to Strong Buy and increased the price target from $365 to $726.

View more earnings on HUBS

What They Think: Zlotsky was very impressed that HubSpot beat its pre-COVID-19 guidance. He called fourth-quarter earnings “outstanding” and said “the stock deserves to trade with the best-in-class SaaS assets.” Zlotskey highlighted both the company's proven success and future outlook, then broke it down into four areas:

  • Accelerated growth from second-quarter 2020, when the pandemic hit, reporting a 43% increase in billing.

  • Growth sustainment into the full year of 2021 with HubSpot’s guidance implying further growth of 32% year-over-year.

  • Strength expected to continue in probability improvements and free cash flow. HubSpot reported operating margins of 9.8% versus the consensus of 5.9%/6.2% and free cash flow of $45.8 million versus the Street estimate of $25.9 million/$27.2 million.

  • Revenue retention coming in at record levels in terms of both customer dollar retention and upgrade rates reaching record levels.

Needham's McDonald saw HubSpot's earnings beat coming from its shift in customer base and said HubSpot’s “robust topline performance and a positive mix shift towards more professional- and enterprise-tiered subscriptions resulted in strong billings outperformance.”

McDonald also highlighted HubSpots' strong growth since the pandemic began and noted that HubSpot is also “experiencing a surge in demand as small businesses look to accelerate their digital transformations.”

A report by Bracelin, which he titled "Shine On You Crazy Diamond," highlighted both the company’s results and its forward-looking statements. Bracelin noted the company crossed two major thresholds in surpassing 100,000 customers and $1 billion in recurring revenue. Bracelin also noted that HubSpot's guidance for over $1.165 billion in 2021 is far above estimates and will demonstrate a year-over-year growth of 32% by just the end of the second quarter.

Peterson said “the bull case is too strong to ignore” and noted HubSpot has much further room for growth with its B2B e-commerce software.

“With the ability to offer marketing, sales, customer service and now CMS capabilities, we believe HubSpot is increasingly viewed as one of the true platforms to modernize B2B front-end software over the next decade,” Peterson said.

HUBS Price Action: Shares closed Friday up 16.36% at $502.40.

(Photo: RebeccaChurt, via Wikimedia Commons)

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