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On Thursday, UBS analyst Taylor McGinnis increased the price target on HubSpot Inc (NYSE:HUBS) shares to $775 from the previous $740, while continuing to hold a Neutral stance on the company’s stock. McGinnis acknowledged HubSpot’s strong performance, citing the company’s fourth-quarter fiscal year 2024 revenue growth of 20% in constant currency (C/C) and billing growth of 21% C/C. The stock has shown remarkable momentum, gaining over 62% in the past six months and currently trading near its 52-week high of $839.37. According to InvestingPro analysis, the company appears to be trading above its Fair Value. Additionally, the initial fiscal year 2025 revenue growth guidance of 16% C/C met expectations.
HubSpot’s recent financial results have bolstered optimism about the company’s revenue potential, especially with the net revenue retention (NRR) rate rising by two points to 104%. The company maintains impressive gross profit margins of 85%, demonstrating strong operational efficiency. The outlook for NRR and average subscription revenue per customer (ASRPC) growth is expected to improve throughout fiscal year 2025, supported by the launch of artificial intelligence offerings this year. InvestingPro subscribers have access to 13 additional key insights about HubSpot’s financial health and growth prospects.
While HubSpot’s EBIT margin for fiscal year 2024 was in line with guidance at 17.5%, the forecast for fiscal year 2025 was slightly below market expectations at 18%. However, when adjusted for foreign exchange effects, the EBIT margin is projected to increase by more than 100 basis points year-over-year to 18.8%. HubSpot also demonstrated significant overperformance in free cash flow (FCF).
McGinnis noted that HubSpot’s guidance assumes a narrower range of outcomes, reflecting a more stable environment. Despite this conservative outlook, the company’s consistent addition of approximately 9,000 to 10,000 new customers per quarter and accelerating ASRPC growth to low single digits suggest the potential for over 20% growth in fiscal year 2025.
In conclusion, while McGinnis commended HubSpot’s execution and the underlying growth potential of the business, he pointed out that the current valuation, at 14 times the calendar year 2025 estimated enterprise value to sales (EV/S) and 73 times EV to FCF, seems to fully reflect these positives.
In other recent news, HubSpot Inc. has been a focal point for various analysts. Stifel has raised its price target for HubSpot to $925, maintaining a buy rating due to the company’s strong performance and optimistic demand environment. TD Cowen also increased the price target to $800, while maintaining a hold rating, acknowledging the company’s solid performance in the fourth quarter.
RBC Capital Markets mirrored this positive outlook, maintaining an Outperform rating and raising the price target to $950. They highlighted HubSpot’s strong retention metrics and strategic use of artificial intelligence. Truist Securities increased its price target to $900, emphasizing the company’s resilient execution and growth avenues despite foreign exchange headwinds.
Needham analysts have also increased their price target to $900, maintaining a Buy rating, following HubSpot’s strong fourth-quarter results. They anticipate that net new Annual Recurring Revenue and subsequent subscription growth will pick up speed in the second quarter of 2025. These recent developments indicate that HubSpot is well-positioned for a robust 2025, with strategic moves and strong performance being key drivers.
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