Stock Wars: HubSpot Vs. Salesforce

Benzinga’s Stock Wars series matches up two leaders in a major industry sector, with the goal of letting readers decide which company is the better investment.

In this week’s installment, we present a duel between two of the leading U.S. business software companies: HubSpot Inc HUBS and salesforce.com, inc. CRM.

All About HubSpot: Founded in 2006 and headquartered in Cambridge, Massachusetts, HubSpot offers a customer relationship management (CRM) platform incorporates marketing, sales, service and website management products.

HubSpot closed 2020 with mixed results. On the plus side, the company boasted $883 million in total revenue, up 31% from to 2019. This was divided between $853 million in subscription revenue, up 32% compared to 2019, and $30 million in professional services and other revenue, up 5% year-over-year. The company grew total customers to 103,994 in 2020, up 42% from the previous year,

However, the company also recorded a GAAP net loss in 2020 of $85 million or negative $1.90 per basic and diluted share, compared to a loss of $53.7 million, or negative $1.28 per basic and diluted share in 2019.

Nonetheless, the company is accentuating the positive and looking ahead to a brighter 2021, with a forecast for total revenue in the range of $1.16 billion to $1.17 billion and non-GAAP operating income in the range of $98 million to $102 million, with non-GAAP net income per common share is expected to be in the range of $1.51 to $1.59.

To help move itself in the direction of the proverbial bigger and better, HubSpot acquired The Hustle — a media company that produces a newsletter, podcast and premium research content — in February for an undisclosed sum. With this acquisition, HubSpot plans to add a media component to its offerings.

“For many customers, their first introduction to HubSpot is through our educational blog, Academy, and YouTube content, not our software,” said Kieran Flanagan, senior vice president of marketing. “More recently, our customers have started to seek out news and trends-based content across new forms of media like podcasts, newsletters and research. By acquiring The Hustle, we'll be able to better meet the needs of these scaling companies by delivering educational, business, and tech trend content in their preferred formats.”

Last week, the company made an undisclosed “strategic investment” in OneSignal Inc, a customer engagement messaging provider.

Andrew Lindsay, HubSpot’s senior vice president of corporate development and business development, said the investment reflects the companies’ shared “commitment to building products for a community of customer-oriented developer.”

Earlier this month, BofA Securities Brad Sills initiated coverage of HubSpot with a Buy rating and $600 price target,  proclaiming that HubSpot is “well-positioned to continue gaining share in the vast SMB front office applications industry” and has a “long runway for 25%+ revenue growth.”

HubSpot has a 52-week high of $547.47 and 52-week low of $133.89.

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Selling Salesforce: Founded in 1999 and headquartered in San Francisco, Salesforce also offers a customer relationship management platform — indeed, the company cleverly snagged the "CRM" acronym for its ticker.

In February, the company reported total fiscal 2021 revenue of $21.2 billion, up 24% year-over-year. This was divided between subscription and support revenues of $19.98 billion, up 25% year-over-year, and professional services and other revenues of $1.28 billion, up 21% year-over-year.

The company also reported net income of $4 billion, up from the previous fiscal year’s $126 million, and basic net income per share of $4.48, compared to 15 cents one year earlier.

"We never could have predicted a year ago what was in store, which makes me incredibly proud of how well we pivoted our company to adapt to this pandemic world,” said chairman and CEO Marc Benioff.

Looking ahead, Salesforce raised its fiscal year 2022 guidance to a range of $25.65 billion to $25.75 billion.

During the first part of this year, Salesforce announced that more than 150 international, federal, state and local government agencies and health care organizations were using its technology for vaccine management and COVID-19 tracking. It also announced expanded partnerships with the Boys & Girls Clubs of America, Accenture ACN and the Utah-based, online-exclusive TAB Bank.

Earlier in the week, Salesforce launched Digital 360 for Industries, a set of services featuring prebuilt templates, industry-specific developer toolkits and customer guides. The company positioned the new offering as a tool to help businesses with data capture, systems integration and compliance requirements.

Next month, Salesforce will reopen its San Francisco headquarters, although employees have the option to work remotely through the end of the year. The company is San Francisco’s largest employer, with a 9,450-person workforce.

Salesforce opened for trading at $230.50, close to its 52-week high of $284.50 and distant from its 52-week low of $148.

The Verdict: Although both companies have turned in admirable financial performances, Salesforce came into 2021 in a stronger position and is maintaining its vibrancy as we sail into the second quarter. In this duel, Salesforce could be the stronger stock investment.

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(Illustration by Mohammed Hassan/Pixabay.)