Piper Sandler analyst Brent Bracelin maintained an Overweight rating on HubSpot Inc (NYSE:HUBS) with a $570 price target.
Bracelin expects HubSpot to gain market share due to its highly efficient GTM effort combined with organic product development, which results in customer satisfaction and structurally higher gross dollar retention in the high 80s.
The analyst noted that the company is increasing, expanding at three times the market's 11% rate over the last four years, yet its share is still a tiny 4%.
Also Read: HubSpot Analysts Cut Their Forecasts After Q2 Results
In the near term, HubSpot faces headwinds in macro and foreign exchange, but the company expects to recover quickly when the economy strengthens.
Bracelin attended the HubSpot customer conference (Inbound) and analyst day in Boston, MA, which left him incrementally positive that moving past the election or interest rate cuts could spur new customer spending growth.
The analyst remains impressed with HubSpot's product innovations, which drive substantial customer net additions and above-market growth despite two years of challenging macroeconomic conditions.
The company discussed a new series of AI product innovations, Bracelin flagged. Partner and customer discussions indicate incremental bullishness on demand trends moving into 2025.
The company also updated its long-term operating margin target from 20%-25% to 25%. Agency partners remain committed to the HubSpot platform and, despite a change in commission structure, continue to drive net new business for the company, the analyst noted.
CEO Yamini Rangan's keynote address highlighted the key challenge for HubSpot's customers over the last two years. Bracelin noted that this challenge is highly correlated to the recent interest rate cycle, making attracting and retaining customers more demanding.
Management continues accelerating AI product development with several new modules released at Inbound 2024.
During the keynote session, Bracelin noted that CTO and co-founder Dharmesh Shah highlighted HubSpot's development of a "LinkedIn"-style interface where customers can search for and utilize AI agents for various use cases.
Based on partner discussions, the analyst summarized his conclusions. Near-term trends are improving, with July and August being better than May and June, Bracelin noted.
Bracelin spoke with several ZoomInfo Technologies Inc (NASDAQ:ZI) partners and direct customers, who indicated that more SMB churn could be on the company's horizon.
During the formal investor session, management highlighted core tenets of the HubSpot platform, including ease of use, fast time to value, and a unified platform built organically, the analyst noted. The company discussed usage-based pricing for the first time, which could be on the horizon.
Bracelin projected fiscal 2024 revenue of $2.57 billion and EPS of $7.66.
Price Action: HUBS stock is up 4.86% at $528.52 at the last check on Thursday.
Photo via Company