Hubspot (HUBS) stock price has done well this year and is loitering near its highest level since December 2021. HUBS was trading at $720, and was slowly forming a bullish flag chart pattern, pointing to more gains in the coming months. This rally has brought its market cap to over $37 billion, making it one of the biggest companies in the SaaS industry. 

Growing company and gaining market share

Hubspot is a large company that offers software targeting small and large enterprises. Its solutions help companies in their marketing, and customer relations, and simplify other parts of their businesses.

Hubspot is used widely globally by firms like eBay, DoorDash, Reddit, Tripadvisor, and Eventbrite. Its best-known service is one that lets companies to communicate with their customers on their websites. It is also a popular name in the marketing industry.

Hubspot’s business has grown over the years, and it now serves over 238,000 companies worldwide. This growth is also reflected in Hubspot’s financial statement, which shows that its annual revenue has grown from $674 million in 2019 to over $2.5 billion in the trailing twelve months. This performance partially explains why Google considered buying the company a few months ago. 

The most recent results showed that Hubspot’’s business was doing well as its revenue rose by 22% to $2.5 billion. That is an impressive growth trajectory for a company that was started in 2006. Hubspot’s customers grew by 23% to 238,000.

The company believes that its business has more room to run because the total addressable market stands at over $174 billion, higher than the current $76 billion.

It has invested in artificial intelligence as part of its growth trajectory. Its Breeze product is made of a copilot and agents that simplify how customers interact with its products. Ultimately, its goal is to ensure that AI powers all its operations in the future. 

Hubspot has also grown its margins, with the last financial results showing that its operating margin hit 19%.

Analysts are optimistic that Hubspot will have strong growth potential in the future. They expect that its quarterly results will get to $673 million, a 15.8% increase from the same period last year. It will then make $708 million in the next quarter.

Hubspot’s annual revenue is expected to be $2.6 billion, followed by $3.08 billion in the next financial year. These are strong numbers for a company that crossed the $1 billion just a few years ago.

Hubspot valuation concerns

A major concern about Hubspot is that its business is highly overvalued since it has struggled to make a profit over the years. Its annual loss in the last financial year stood at over $176 million, much higher than the $112 million it lost a year earlier. 

There are signs that Hubspot is now moving into profitability, as it made a $8.1 million profit in the last quarter. Analysts expect that Hubspot will make an earnings per share of $2.2 in the current quarter, up from $1.76 last year. The annual EPS is expected to come in at $7.9 followed by $8.55.

Hubspot has a market value of over $37 billion, giving it a forward P/E ratio of 78. This valuation multiple is higher than that of companies like NVIDIA that are seeing faster growth metrics.

The best approach to value a company like Hubspot that uses a SaaS business model is known as the rule of 40. This is an approach that looks at a company’s growth and margins. In this case, it has a forward growth metric of 20% and an operating margin of 19%, giving it a rule of 40 metric of 39%. 

Hubspot stock price analysis

(Click on image to enlarge)

The weekly chart shows that the HUBS share price has staged a strong comeback in the past few months. It recently crossed the important resistance level at $693.53, its highest point on April 1. 

The stock has also formed a bullish pennant chart pattern, a popular continuation sign. It is also being supported by 50-week and 100-week moving averages. Therefore, the path of the least resistance for the stock is bullish, with the next point to watch being at $800.

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