HubSpot trading at a discount to large-cap software – Morgan Stanley

By Sam Boughedda

HubSpot (NYSE:) shares are trading at a discount to large-cap software, according to Morgan Stanley analysts, who raised the firm’s price target on the stock to $466 from $447, maintaining an Overweight rating in a note to clients on Tuesday.

They explained in the note that the firm’s deep dive analysis has increased its confidence in HubSpot’s ability to well balance growth and profitability. The analysts also state that it supports Morgan Stanley’s forecast for a 23% revenue CAGR and 50% operating income CAGR (including 840bps margin expansion) over the next three years.

“We see HubSpot benefiting from a broad solution portfolio able to consolidate IT spend, momentum with low-end customers, and penetration into an upmarket opportunity driving the topline, while recent restructuring expands profitability,” wrote analysts.

They add that HubSpot “remains a best-of-breed player in the SMB market” and checks “highlight continued progress addressing upmarket customers with larger land sizes and expansion opportunities.”

“We view the accumulation of new, albeit smaller customers, during a challenging macro as a supportive tailwind for future growth, as these customers expand spend in a macro recovery,” analysts continued. “We view HubSpot as best positioned to weather the disruption within our SMB-exposed coverage.”