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HubSpot: Emerging Stronger From The Pandemic

May 08, 2020 10:04 AM ETHubSpot, Inc. (HUBS) Stock2 Comments
Gary Alexander profile picture
Gary Alexander


  • HubSpot rallied ~7% after the company reported a strong second-quarter earnings surprise.
  • HubSpot believes that, despite an initial headwind in March, the company's capacity to close new deals has returned to normalized levels by April.
  • Management believes HubSpot's product is perfectly designed to helping companies take their marketing efforts online, thus accelerating long-term demand for the platform.
  • Though HubSpot has tempered its expectations for both Q2 and the full fiscal year, the strength we saw in Q1 plus management's bullish comments makes us believe there's opportunity on top of its forecast.

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HubSpot (NYSE:HUBS), the inbound marketing CRM platform, just released its first-quarter earnings results, containing a welcome upside surprise to Wall Street's expectations. To some extent, it was difficult to picture this bullishness on HubSpot. Its flagship product is a CRM, which we expected to be a vulnerable product category in the software sector (with little sales activity going on since the lockdowns began, many companies are cutting headcount in the sales and marketing departments that use CRM tools). In addition, HubSpot - with its free basic CRM and tools oriented around smaller businesses - was expected to be impacted by higher churn given the macroeconomic fallout for small, insufficiently-capitalized businesses.

But while HubSpot cited some challenges stemming from the pandemic, the overall tome of HubSpot's results and its outlook were overwhelmingly bullish. Shares rose ~7% following the earnings release:

Even as HubSpot looks to reclaim the all-time highs that the stock set in February, I believe the bullish case in this stock remains very much intact. The key pieces of this bullish thesis include:

  • Differentiated product, even in the crowded CRM space. HubSpot is the category leader in a space it has defined as "inbound marketing," which means selling to customers that have already interacted in some way with your brand, versus outright cold calls. HubSpot believes this positioning has helped it in the current sales environment.
  • Continuous product development. HubSpot continues to flesh out its suite of sales and marketing tools, and in spite of the pandemic, the company in Q1 rolled out a CMS tool (content management system) that allows users to manage digital content like websites

This article was written by

Gary Alexander profile picture
With combined experience of covering technology companies on Wall Street and working in Silicon Valley, and serving as an outside adviser to several seed-round startups, Gary Alexander has exposure to many of the themes shaping the industry today. He has been a regular contributor on Seeking Alpha since 2017. He has been quoted in many web publications and his articles are syndicated to company pages in popular trading apps like Robinhood.

Analyst’s Disclosure: I am/we are long HUBS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (2)

crazylikebudfox profile picture
" HubSpot's commentary on the impacts of the coronavirus seem to suggest that the company was hit hard in March/Q1, and that past the first "few weeks of April, HubSpot actually saw a tailwind in sales. If this is the case, we wouldn't expect there to be eleven points of sequential growth deceleration between Q1's 31% y/y growth rate and Q2."

Seriously? It's decelerating cause they cut prices massively to "save" business and they are seeing huge downgrades. Net retention is running at 80%, meaning they are seeing 30% gross churn rates. This customer base is getting decimated and Hubspots only option is to give away product and loaning money to its customers. Super bullish.
Where do they say 80% retention?
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