HubSpot Stock At $840 – Is the Price Justified?
HubSpot (NYSE: HUBS), a cloud-based customer relationship management platform, recently released its Q4 results, with revenues and earnings exceeding the street estimates. It reported sales of $703 million and adjusted earnings of $2.42 per share, compared to the consensus estimates of $674 billion and $2.20, respectively. The company benefited from new customer additions. However, HubSpot’s outlook for 2025 fell short of expectations.
HubSpot’s revenue of $703 million in Q4 was up 21% y-o-y, led by a 21% rise in subscription revenues. The company added 42,848 new customers, reflecting a 21% y-o-y growth in its customer base. However, average subscription revenue per customer declined 0.5% to $11,312 in Q4. HubSpot also saw its operating margin expand by 180 bps to 18.9% during the quarter. Higher revenues clubbed with margin expansion resulted in earnings of $2.42 per share, up 31% versus the prior-year quarter. Looking forward, the company expects its 2025 sales to be $2.99 billion and earnings to be $9.15 per share, compared to the consensus estimates of $3 billion and $9.18, respectively. These figures imply sales growth rate slowing to 14% versus 21% in 2024, and earnings growth rate falling to 12%, compared to 35% growth seen in 2024.
Looking at HUBS stock, it has risen 35% since the beginning of 2024, faring slightly better than the broader S&P500 index, up 27%. This can be attributed to the company’s upbeat Q3 last year and improving profitability. However, looking at a slightly longer timeframe, the increase in HUBS stock over the recent years has been far from consistent, with annual returns being considerably more volatile than the S&P 500. Returns for the stock were 66% in 2021, -56% in 2022, 101% in 2023, and 20% in 2024. Given the current uncertain macroeconomic environment around rate cuts and ongoing trade wars, could HUBS face a similar situation as it did in 2022 and 2024 and underperform the S&P over the next 12 months — or will it see a strong jump?
At its current levels of around $840, HUBS stock is trading at a little over 16x trailing revenues, aligning with the stock’s average P/S ratio over the last five years. Given the company’s decelerating growth trajectory and challenges in boosting subscriber revenue per customer, there’s limited justification for an upward valuation adjustment. We believe HUBS shares are appropriately priced at $840, and potential investors may find better entry opportunities during future market pullbacks.
Systematic Strategies & Rules-Based Wealth Management
Trefis runs systematic portfolio strategies that incorporate risk control through a combination of high-quality picks and active hedges. We’ve partnered with Empirical Asset Management, a rules-based wealth manager, to make these strategies available to investors. If you’re interested in learning more about Trefis strategies or Empirical check out this link.