HubSpot's Strength In GenAI To Boost Profitability, Value-Based Pricing, Analyst Boosts Price Target By 20%

Truist Securities analyst Terry Tillman reiterated a Buy rating on HubSpot, Inc. HUBS, raising the price target to $600 from $500.

HUBS recently reported Q2 results where total revenue of $529.1 million was up 25% Y/Y. HUBS reported 2Q results above the analyst's revenue, profitability, EPS, and cash flow estimates.

Tillman applauds the company's continued strong execution and proven strategy for balancing growth and profitability vs. its peers.

The analyst notes that the company provided another outlook that drives estimates higher while accounting for a potential worsening in the macro.

The analyst raised FY23 revenue estimates from $2.08 billion to $2.12 billion.

For FY24, Tillman raised revenue estimates from $2.53 billion to $2.58 billion.

On the GenAI front, HUBS is seeing positive feedback and traction (e.g. users asking GenAI to tell them what certain charts mean, or to create charts from data), notes the analyst. 

While still in the early stages, management believes it will be able to implement value-based pricing for certain GenAI features.

This apart, HUBS is continuing to see market momentum in multi-hub as well as full-suite adoption, the analyst notes. 

Management noted more new customers starting with multiple hubs, leading to larger deals, the analyst adds.

However, management noted that the macro environment remains challenging, with customer buying trends remaining steady (not better, not worse), and budgets remaining under scrutiny & being optimized, Tillman notes.

Besides tight customer budgets, macro headwinds include elongated sales cycles and customer decisions requiring committee approval.

Price Action: HUBS shares are trading lower by 10.1% to $496.87 on the last check Thursday.