Hubspot Looks Bright After Q1 Earnings: Should You Hold?

Hubspot, Inc. HUBS has been a favorite with investors, courtesy of its rising share price and strong fundamentals. We suggest you retain the stock in your portfolio at the moment as it looks promising and is poised to carry the momentum ahead. This Zacks Rank #3 (Hold) stock has an estimated long-term earnings growth rate of 50%.

The company’s shares have gained 63.9% year over year, substantially outperforming the industry’s 23.4% rally.

What’s Going in Hubspot’s Favor?

Hubspot delivered stellar first-quarter 2018 results. The company reported non-GAAP earnings of 15 cents per share compared with 3 cents per share in the year-ago quarter. The figure also beat the Zacks Consensus Estimate of 11 cents per share.

Revenues of $ 114.6 million surged 39% year over year in first-quarter 2018. The figure surpassed the Zacks Consensus Estimate of $ 110 million as well as the guided range of $ 109.2-$ 110.2.

Year-over-year growth in revenues can be primarily attributed to its growing customer base, which increased 44%.

Adding to the positives, management is positive about the performance of Hubspot One and Hubspot CRM tools. Additionally, the acquisitions of Motion AI and Kemvi reflect the company’s focus on integrating artificial intelligence (AI) in its offerings, as well as expanding solutions portfolio.

Recently, HubSpot announced that the company will adopt Google Cloud in order to strengthen its international cloud infrastructure. The extended partnership with Google will help it rapidly penetrate the SMB market in Europe.

Lastly, management is also optimistic about the launch of Customer Hub scheduled by this year.

Encouraging Guidance

HubSpot forecasts revenues in the range of $ 117-$ 118 million for second-quarter 2018. The Zacks Consensus Estimate was pegged at $ 115.5 million.

Moreover, HubSpot anticipates non-GAAP net income per share to be in the range of 14-16 cents. The Zacks Consensus Estimate was pegged at 14 cents per share.

For full-year 2018, HubSpot updated guidance. The company now expects revenues in the range of $ 489-$ 492 million (previous guidance $ 481 million to $ 485 million). The Zacks Consensus Estimate was pegged at $ 483.4 million.

Non-GAAP net income per share is now anticipated to be in the range of 59-65 cents (previously 51-59 cents). The Zacks Consensus Estimate was pegged at 55 cents per share.

Positive Earnings Surprise History

HubSpot has an impressive earnings surprise history. The company outpaced the Zacks Consensus Estimate in the trailing four quarters, recording a positive average earnings surprise of 183.2%.

Our Take

We expect the aforementioned factors to help the company sustain strong momentum and stay afloat even amid difficult times. Consequently, we suggest investors to hold on to the stock at the moment.

Zacks Rank & Key Picks

Hubspot carries a Zacks Rank #3 (Hold).

Few better-ranked stocks in the broader technology sector include NVIDIA Corporation NVDA, Texas Instruments Incorporated TXN and Groupon, Inc. GRPN, all sporting a Zacks Rank #1 (Strong Buy).  You can see the complete list of today’s Zacks #1 Rank stocks here.

NVIDIA, Texas Instruments and Groupon have a long-term expected EPS growth rate of 10.3%, 9.6% and 6.5%, respectively.

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