Hubspot Insider Sold Shares Worth $3,066,700, According to a Recent SEC Filing

Investors might want to bet on HubSpot (HUBS), as it has been recently upgraded to a Zacks Rank #2 (Buy). This upgrade is essentially a reflection of an upward trend in earnings estimates -- one of the most powerful forces impacting stock prices.

A company's changing earnings picture is at the core of the Zacks rating. The system tracks the Zacks Consensus Estimate -- the consensus measure of EPS estimates from the sell-side analysts covering the stock -- for the current and following years.

Individual investors often find it hard to make decisions based on rating upgrades by Wall Street analysts, since these are mostly driven by subjective factors that are hard to see and measure in real time. In these situations, the Zacks rating system comes in handy because of the power of a changing earnings picture in determining near-term stock price movements.

Therefore, the Zacks rating upgrade for HubSpot basically reflects positivity about its earnings outlook that could translate into buying pressure and an increase in its stock price.

Most Powerful Force Impacting Stock Prices

The change in a company's future earnings potential, as reflected in earnings estimate revisions, has proven to be strongly correlated with the near-term price movement of its stock. That's partly because of the influence of institutional investors that use earnings and earnings estimates for calculating the fair value of a company's shares. An increase or decrease in earnings estimates in their valuation models simply results in higher or lower fair value for a stock, and institutional investors typically buy or sell it. Their transaction of large amounts of shares then leads to price movement for the stock.

Fundamentally speaking, rising earnings estimates and the consequent rating upgrade for HubSpot imply an improvement in the company's underlying business. Investors should show their appreciation for this improving business trend by pushing the stock higher.

Harnessing the Power of Earnings Estimate Revisions

As empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock movements, tracking such revisions for making an investment decision could be truly rewarding. Here is where the tried-and-tested Zacks Rank stock-rating system plays an important role, as it effectively harnesses the power of earnings estimate revisions.

The Zacks Rank stock-rating system, which uses four factors related to earnings estimates to classify stocks into five groups, ranging from Zacks Rank #1 (Strong Buy) to Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record, with Zacks Rank #1 stocks generating an average annual return of +25% since 1988. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Earnings Estimate Revisions for HubSpot

This cloud-based marketing and sales software platform is expected to earn $7.96 per share for the fiscal year ending December 2024, which represents a year-over-year change of 35.1%.

Analysts have been steadily raising their estimates for HubSpot. Over the past three months, the Zacks Consensus Estimate for the company has increased 4754.5%.

Bottom Line

Unlike the overly optimistic Wall Street analysts whose rating systems tend to be weighted toward favorable recommendations, the Zacks rating system maintains an equal proportion of 'buy' and 'sell' ratings for its entire universe of more than 4000 stocks at any point in time. Irrespective of market conditions, only the top 5% of the Zacks-covered stocks get a 'Strong Buy' rating and the next 15% get a 'Buy' rating. So, the placement of a stock in the top 20% of the Zacks-covered stocks indicates its superior earnings estimate revision feature, making it a solid candidate for producing market-beating returns in the near term.

The upgrade of HubSpot to a Zacks Rank #2 positions it in the top 20% of the Zacks-covered stocks in terms of estimate revisions, implying that the stock might move higher in the near term.

Zacks Investment Research

Shares of HubSpot (HUBS) have been strong performers lately, with the stock up 27.9% over the past month. The stock hit a new 52-week high of $702.81 in the previous session. HubSpot has gained 20.8% since the start of the year compared to the 31% move for the Zacks Computer and Technology sector and the 31.6% return for the Zacks Internet - Software industry.

What's Driving the Outperformance?

The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on November 6, 2024, HubSpot reported EPS of $2.18 versus consensus estimate of $1.89 while it beat the consensus revenue estimate by 3.54%.

For the current fiscal year, HubSpot is expected to post earnings of $7.96 per share on $2.59 billion in revenues. This represents a 35.14% change in EPS on a 19.36% change in revenues. For the next fiscal year, the company is expected to earn $9.16 per share on $3.01 billion in revenues. This represents a year-over-year change of 15.13% and 16.01%, respectively.

Valuation Metrics

HubSpot may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.

On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

HubSpot has a Value Score of F. The stock's Growth and Momentum Scores are A and A, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 88.2X current fiscal year EPS estimates, which is a premium to the peer industry average of 32.9X. On a trailing cash flow basis, the stock currently trades at 5X versus its peer group's average of 28.2X. Additionally, the stock has a PEG ratio of 4.34. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, HubSpot currently has a Zacks Rank of #2 (Buy) thanks to favorable earnings estimate revisions from covering analysts.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if HubSpot passes the test. Thus, it seems as though HubSpot shares could still be poised for more gains ahead.

How Does HUBS Stack Up to the Competition?

Shares of HUBS have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Bumble Inc. (BMBL). BMBL has a Zacks Rank of # 2 (Buy) and a Value Score of A, a Growth Score of B, and a Momentum Score of A.

Earnings were strong last quarter. Bumble Inc. beat our consensus estimate by 75%, and for the current fiscal year, BMBL is expected to post earnings of $0.85 per share on revenue of $1.07 billion.

Shares of Bumble Inc. have gained 24.5% over the past month, and currently trade at a forward P/E of 3.31X and a P/CF of 17.59X.

The Internet - Software industry is in the top 18% of all the industries we have in our universe, so it looks like there are some nice tailwinds for HUBS and BMBL, even beyond their own solid fundamental situation.

Zacks Investment Research

How much a stock's price changes over time is important for most investors, since price performance can both impact your investment portfolio and help you compare investment results across sectors and industries.

The fear of missing out, or FOMO, also plays a factor in investing, especially with particular tech giants, as well as popular consumer-facing stocks.

What if you'd invested in HubSpot (HUBS) ten years ago? It may not have been easy to hold on to HUBS for all that time, but if you did, how much would your investment be worth today?

HubSpot's Business In-Depth

With that in mind, let's take a look at HubSpot's main business drivers.

Headquartered in Cambridge, MA, HubSpot Inc. provides inbound marketing and sales application over the cloud. The software-as-a-service (SaaS) vendor helps businesses attract more customers through search engine optimization (SEO), social media, blogging, website content management, marketing automation, email, Customer Relationship Management (CRM), analytics and reporting.

HubSpot completed its Initial Public Offering (IPO) on Oct 15, 2014. In third-quarter 2024, the company generated revenues of $669.7 million (up 20.1% year over year), the majority of which came from subscriptions – 97.8% of total revenues.

HubSpot primarily caters to the small and medium businesses (SMB) market, where the churn rate is relatively higher as compared with the enterprise markets.

The company’s core products are Marketing Hub, Service Hub and Sales Hub, together referred to as HubSpot growth platform.

HubSpot Marketing’s important features are Marketing Automation and Email, Content Optimization System (COS), Social Media, SEO, CRM Sync and Reporting and Analytics. HubSpot Marketing is available for free as well as at different price points.

Marketing Hub aimed at enterprise, professional and starter marketers start at $3,600, $890 respectively and starter edition start $20 per month/seat..

Sales Hub features are Email Engagement Notifications, Sequences, Meetings, Calling, New Lead and Website Visit Alerts, Email Templates and CRM Tracking and Contact Insights.

Sales Hub aimed at enterprise, professional marketers start at $150, $100 and $20, respectively per month/seat.

Service Hub features are automation and routing, live chat and conversations, conversational bots, team emails, help desk and tickets, reporting tools and feedback, among others.

Service Hub aimed at enterprise, professional and starter marketers start at $150, $100 and $20, respectively per month/seat.

HubSpot CRM is a free offering that features Contact Management, Salesforce Automation and Pipeline Reporting, among others.

Bottom Line

Anyone can invest, but building a successful investment portfolio requires research, patience, and a little bit of risk. So, if you had invested in HubSpot ten years ago, you're likely feeling pretty good about your investment today.

A $1000 investment made in November 2014 would be worth $19,806.27, or a 1,880.63% gain, as of November 13, 2024, according to our calculations. Investors should note that this return excludes dividends but includes price increases.

Compare this to the S&P 500's rally of 193.58% and gold's return of 114.96% over the same time frame.

Analysts are anticipating more upside for HUBS.

HubSpot is witnessing steady multi-hub adoption from enterprise customers in the premium market. It reported strong third-quarter 2024 results, with both the top and bottom lines surpassing the Zacks Consensus Estimate. The results were primarily driven by strong user engagement across all segments. Integration of HubSpot AI, which includes cutting-edge features such as AI assistance, AI agents, AI insights, and ChatSpot, is driving more value to customers. The growing adoption of inbound applications is a tailwind. However, its lower price starter pack to attract new customers will likely impact the average revenue per customer growth. Strengthening of the U.S. dollar can affect its revenues. Rising operating expenses are straining margins. Cautious spending decisions stemming from an unfavorable macro environment are concerning. Shares have gained 27.93% over the past four weeks and there have been 12 higher earnings estimate revisions for fiscal 2024 compared to none lower. The consensus estimate has moved up as well.

Zacks Investment Research