HubSpot To Gain From Healthy New Customer Adds, Product Expansion: Analyst

BMO Capital Markets analyst Keith Bachman reiterated the Outperform rating on HubSpot, Inc. HUBS, raising the price target to $520 from $500.

In the recently reported Q3, the company's total revenues were up 26% year-over-year, while EPS of $1.59 beat estimates of $1.24.

Management guided December quarter revenues to be roughly flat q/q vs 5.8% q/q growth in 4QFY22. 

According to the analyst, the December quarter revenue guide looks very conservative, even with a $7 million q/q FX impact.

Similarly, an implied FCF margin of 12% compares to 15% in 4QFY22, which the analyst highlights as conservative.

For clarification, HUBS is assuming that its FY23 FX y/y impact is neutral, whereas management previously indicated that FX would be a 50bps tailwind, the analyst notes. 

Bachman writes that the December quarter revenue growth guide of ~17% CC is an appropriate starting point for FY24 organic revenue growth.

The analyst incorporated about 1pt of FX headwind in FY24, which was not previously included. 

Overall, the analyst underscores HUBS as a strong, tightly integrated marketing platform that is well-positioned in the SMB market. 

The analyst highlights customer mix up, healthy new customer adds, product expansion, and upmarket opportunity, which can help the company generate durable revenue growth over the next few years. Further, the analyst estimates a large, underpenetrated global TAM for the company going ahead.

Following Q3, the analyst raised FY23 revenue guidance to $2.146 billion from $2.118 billion. Bachman raised FY23 EPS guidance to $5.67 from $5.26.

Price Action: HUBS shares are trading lower by 5.82% to $416.42 on the last check Thursday.