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On Friday, Piper Sandler, a financial services firm, increased its price target on HubSpot Inc (NYSE:HUBS) shares to $645 from the previous target of $535, while retaining a Neutral rating on the stock. The adjustment follows HubSpot’s first-quarter results, which the firm described as "healthy" despite a challenging economic environment and uncertainties with small and medium-sized businesses (SMBs). According to InvestingPro data, HubSpot commands a market capitalization of $31.88 billion and currently appears overvalued based on its Fair Value analysis.
Piper Sandler’s analysts highlighted HubSpot’s consistent performance, noting the company’s balance between growth and profitability. They pointed out HubSpot’s three-year average Rule of 40 (R40) ratio, which stands at 41%. The R40 ratio is a benchmark for software companies, combining revenue growth and profit margins to assess overall financial health. InvestingPro data reveals impressive gross profit margins of 84.83%, though they cautioned that this metric might decline to 35% as revenue growth slows more rapidly than free cash flow (FCF) margins expand. InvestingPro subscribers can access 8 additional key tips about HubSpot’s financial health.
The company’s subscription growth slowed to 18% on a constant currency basis, falling below 20% for the first time. Despite this moderation in growth, the results were deemed better than feared. Recent InvestingPro data shows revenue growth at 19.17%, with the company maintaining an overall "GOOD" financial health rating. Piper Sandler’s decision to raise the price target to $645 is based on higher estimates and the multiple warranted by HubSpot’s solid execution and potential artificial intelligence (AI) upside levers.
The analysts also mentioned the forward enterprise value to free cash flow (EV/FCF) multiple for the calendar year 2026 estimate (CY26E) is 44 times, indicating that there is little room for error as growth rates decelerate below the 20% threshold. Despite the increased price target, the firm’s stance on HubSpot stock remains neutral, signaling a cautious outlook on its valuation in light of the anticipated growth moderation. This aligns with InvestingPro’s comprehensive analysis, which suggests the stock is trading above its Fair Value. For detailed valuation metrics and expert insights, investors can access the full Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, HubSpot Inc. reported its first-quarter 2025 earnings, showcasing an EPS of $1.78, slightly surpassing the forecast of $1.77. The company achieved an 18% year-over-year revenue growth, reaching $767 million, which exceeded the expected $699.88 million. Despite these positive results, HubSpot’s stock experienced a decline in after-hours trading, reflecting investor concerns about future growth amid macroeconomic uncertainties. Additionally, HubSpot’s customer base expanded by 19% to 258,000, indicating strong demand for its offerings.
In terms of analyst activity, Needham maintained a Hold rating on HubSpot with a price target of $900, while JPMorgan lowered its price target from $850 to $775 but kept an Overweight rating. Evercore ISI raised its price target for HubSpot to $700, maintaining an In Line rating. Analysts noted the company’s steady billings growth and the introduction of a new credit-based pricing model for Breeze Agents, which is anticipated to impact user engagement trends. HubSpot’s management has also highlighted the company’s focus on AI integration and innovation, with promising adoption rates for its AI-infused products.
HubSpot’s guidance for the second quarter includes revenue expectations between $738 and $740 million, surpassing the consensus of $725 million. The company also raised its fiscal year 2025 revenue guidance by approximately $50 million, largely due to favorable foreign exchange movements. Despite the challenges posed by the uncertain macroeconomic environment, HubSpot continues to monitor trends closely and emphasizes its commitment to delivering value through its AI strategy and product portfolio.
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