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On Wednesday, RBC Capital Markets adjusted its price target for HubSpot Inc (NYSE:HUBS) shares, reducing it to $800 from the previous $950, while maintaining an Outperform rating. The adjustment follows HubSpot's recent performance, where it has underperformed the iShares Expanded Tech-Software Sector ETF (IGV) by 15% since the company's Q4 earnings report. According to InvestingPro data, the stock has experienced a significant 17.9% decline over the past week, with the current price showing signs of oversold conditions based on technical indicators. This underperformance is attributed to tariff headwinds and concerns about the stability of small and medium-sized businesses (SMBs).
RBC Capital's analyst acknowledged the challenges faced by HubSpot, including its international exposure, but suggested that the subsequent decline in share price might be an overreaction. The analyst believes HubSpot is likely to be less affected by tariffs compared to other software vendors, even when considering secondary impacts. The company maintains strong fundamentals, with InvestingPro data showing impressive gross profit margins of 85% and a healthy balance sheet with more cash than debt. Subscribers to InvestingPro can access 14 additional key insights about HubSpot's financial health and market position.
The firm's analysis indicates that consensus estimates for HubSpot may be conservative and anticipates potential upward revisions. These revisions are expected to be driven by HubSpot's increased penetration in the up-market and successful adoption of its seats-based pricing model. Notably, HubSpot has seen its net retention rate rise to 104%, although there is an expectation of a temporary decline due to seasonal factors in Q1. However, management projects a rebound in subsequent quarters, supported by continued adoption of the new pricing model and upcoming price increases.
Management's outlook for 2025 includes an anticipated increase in net revenue retention by a few percentage points year-over-year. Furthermore, RBC Capital highlighted that HubSpot's management did not factor in the potential financial benefits of AI monetization into their 2025 guidance. The company has demonstrated strong growth momentum, with revenue increasing by 21% in the last twelve months. For deeper insights into HubSpot's growth prospects and comprehensive financial analysis, investors can access the detailed Pro Research Report available on InvestingPro, which covers over 1,400 top US stocks. Despite this, the momentum of AI adoption across the company's operations is viewed positively, contributing to the success of various Hub products, such as Content Hub, Marketing Hub, and Service Hub.
RBC Capital concluded that, based on their discussions, a strong quarterly performance from HubSpot is anticipated, which is already expected by the market. The firm remains confident in recommending ownership of HubSpot shares as the company approaches its next earnings announcement.
In other recent news, HubSpot Inc's financial performance and analyst ratings have been in the spotlight. UBS raised its price target for HubSpot to $775, maintaining a Neutral rating, and highlighted the company's fourth-quarter fiscal year 2024 revenue growth of 20% in constant currency. Meanwhile, BofA Securities adjusted its price target for HubSpot to $850 from $950, retaining a Buy rating, citing potential impacts from deteriorating consumer sentiment on software spending. Despite these concerns, HubSpot's margin has improved significantly, with a 770 basis point increase over the past two years, reaching 17.5% in FY24.
Raymond (NSE:RYMD) James reaffirmed an Outperform rating with a $980 price target, noting strong growth in the first quarter of 2025, primarily driven by substantial deals in Europe. Macquarie also initiated coverage with an Outperform rating and a $730 target, attributing HubSpot's success to its comprehensive CRM offerings. The firm highlighted potential revenue growth from net expansions and a strategic focus on larger customers.
Bernstein SocGen set a price target of $693, rating HubSpot as Market Perform, and acknowledged the company's market share gains and revenue growth potential. However, they noted that as the CRM market matures, HubSpot will need to focus on profitability. These recent developments reflect a mixed but generally optimistic outlook from analysts regarding HubSpot's future performance.
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