Can HubSpot Find Its Footing After Alphabet’s Buyout Snub?
HubSpot Inc. (HUBS) has seen its stock tumble by more than **20%** over the past six months, all stemming from Alphabet Inc.’s (GOOGL) unexpected decision to abandon its acquisition quest. For Alphabet, acquiring HubSpot would have not only solidified its position in the booming **customer relationship management (CRM)** software landscape, but it also promised to enhance its **cloud computing services**, intensifying the rivalry against major players like **Microsoft and Amazon**. Furthermore, such a move could have invigorated competition within the **marketing and sales software sectors**, challenging the dominance of heavyweights like **Salesforce**.
From HubSpot’s perspective, integration with Alphabet could have unlocked a treasure trove of resources and technological advancements, allowing the company to innovate and expand. However, this missed opportunity has sent HUBS shares spiraling down. Yet, HubSpot’s **adaptable business model** and robust cash flow could potentially serve as a lifeline for future growth. In fact, earnings estimates for the current and next fiscal years have surged **9%** and **5.1%**, respectively, since May 2024. Let’s dive deeper into the stock’s untapped growth potential.
HubSpot’s Key Growth Drivers
HubSpot is intensifying its focus on gathering and enriching comprehensive customer data derived from **website visits, marketing emails**, and **sales calls**. The **acquisition of Clearbit**, a leading B2B data provider for marketing intelligence, has turbocharged its strategy. By integrating Clearbit’s wealth of information with HubSpot’s AI capabilities, the company aims to forge even more advanced and precise AI functionalities.
HubSpot’s suite of **inbound marketing and sales applications** empowers businesses to effortlessly connect with, attract, and retain customers through traditional marketing channels such as **cold calls, print ads**, and email. The company is committed to delivering a top-notch front-office platform by investing in **anchor hubs** while exploring emerging markets. This growing adoption of inbound applications has significantly shaped its partner network of marketing agencies. Management’s keen emphasis on embedding generative AI into their offerings is set to yield considerable long-term benefits.
Additionally, there is vast potential for HubSpot to cross-sell its products within its existing customer base. The **One HubSpot initiative** plays a pivotal role in driving this growth. Furthermore, the HubSpot **App Marketplace** enhances customer satisfaction by simplifying the process for companies to discover and integrate tools supporting their growth, further entrenching HubSpot in the digital landscape.
Future Outlook
HubSpot is primarily focused on **mid-market businesses**, which encompass firms with 10 to 2,000 employees—an underexplored sector ripe for growth opportunities. The company’s rapid geographic expansion is noteworthy, with international offices in **12 locations** and a customer presence in over **120 countries**. This growth trajectory paints a promising picture for HubSpot’s future.
The company has a robust long-term earnings growth expectation of **18.4%** and has consistently surprised earnings expectations with an impressive average surprise of **10.7%** over the last four quarters.
HubSpot’s Zacks Rank & Competitors to Watch
HubSpot carries a **Zacks Rank #2 (Buy)**, indicating strong potential moving forward. For those interested in exploring more investment options, you can view the complete list of **Zacks #1 Rank (Strong Buy)** stocks here.
Aside from HubSpot, consider **InterDigital, Inc. (IDCC)**, which also holds a Zacks Rank #2. This company is at the forefront of **mobile technology** advancements, sparking growth in wireless communications and related products. With a long-term growth expectation of **15%** and an extraordinary trailing four-quarter earnings surprise rate of **160.2%**, InterDigital is one to watch.
Another noteworthy contender is **Ubiquiti Inc. (UI)**, which similarly holds a Zacks Rank #2. Ubiquiti offers a comprehensive range of networking solutions for both service providers and enterprises. Its adaptability in a rapidly changing market and robust global distribution network sets it apart as an attractive investment opportunity.
As HubSpot navigates its post-buyout challenge, stakeholders should keep an eye on its evolving strategies and robust growth potential.
This article originally appeared on Zacks Investment Research.
