HubSpot PT cut at MS after 'strong' Q4, citing increase in cost of capital
HubSpot (NYSE:HUBS) dipped Friday after Morgan Stanley cut the price target on the software-as-a-service company, noting the fourth-quarter was strong, but the company's cost of capital is going up.
Analyst Stan Zlotsky lowered the price target to $645 from $862 but remained overweight on the stock, noting that the company's management provided confidence for 2022, giving revenue estimate of $1.72 billion to $1.73 billion, which is "well ahead" of the consensus between $1.63 billion and $1.67 billion.
"After finishing 2021 with 47% revenue and billings growth, we see plenty of room for upside to the initial 2022 revenue guidance of 32-33%, especially as NRR sustains 110%+ range," Zlotsky wrote in a note to clients.
"On the customer side, we were impressed to see 7300 net new logos added in the quarter, and management’s comments that they expect to sustain 7K+ trend moving forward."
HubSpot (HUBS) shares were down slightly less than 1% to $495.95 in premarket trading.
In addition, Zlotsky noted that HubSpot (HUBS) generated the third straight quarter of positive average subscription revenue per customer growth at 11.4%, an acceleration from the 9% growth it saw in the third-quarter and 7.8% in the second quarter.
However, the analyst noted that HubSpot's (HUBS) weighted average cost of capital increased to 9.5% from 8% and its adjusted enterprise value to free cash flow value caused the firm to lower its price target.
"This would imply 14.8x EV/CY23 Sales or 0.50x growth adjusted, a premium to the SaaS average of 0.35x, which we believe is warranted," Zlotsky wrote in the note.
In February, investment firm Cowen upgraded HubSpot after it reported fourth-quarter results as the firm said it sees a "compelling buying opportunity."