HubSpot (NYSE: $HUBS) is a leading cloud-based customer relationship management (CRM) platform that provides software products for inbound marketing, sales, and customer service. Founded in 2006, it went public on the NYSE in 2014 and serves over 114,000 customers across more than 120 countries.
The company offers an all-in-one CRM platform to help businesses attract visitors, convert leads, and delight customers. Its suite of tools focuses on delivering a seamless customer experience, and it has become the solution of choice for businesses seeking to upgrade their marketing, sales, and customer service operations.
Shares of HubSpot surged by 7% on Thursday morning following an exclusive report from Reuters indicating that Alphabet, Google’s parent company, is in discussions with its advisors regarding a potential acquisition of the $32 billion firm.
Alphabet Engages Morgan Stanley for HubSpot Deal
Alphabet has engaged Morgan Stanley as its investment banking partner to explore acquiring HubSpot. These discussions primarily revolve around determining an appropriate acquisition price and evaluating the regulatory implications, particularly concerning antitrust considerations.
Though Alphabet hasn’t formally presented an offer to HubSpot, sources familiar with the matter suggest that the tech giant is actively considering the acquisition. However, there’s no guarantee that Alphabet will proceed with a bid.
Google’s Potential HubSpot Acquisition
This prospective deal stands out amidst increased regulatory scrutiny faced by major tech companies, particularly under the Biden administration. Google is confronting multiple antitrust challenges, including a significant lawsuit alleging its abuse of dominance in online search.
If Alphabet proceeds with the acquisition, it will be its largest purchase thus far, allowing it to utilize some of its sizable cash reserves of $110.9 billion as of the end of December 2023. The objective might be to bolster Google’s marketing and advertising capabilities by integrating HubSpot’s software.
HubSpot’s Q4 2023: Revenue Surges, Margins Diverge
Hubspot released its financial outcomes for the Q4 and fiscal 2023 ended December 31, 2023, on February 14. The quarter saw a notable surge in total revenue, reaching $581.9 million, reflecting a 24% rise from the same period in 2022.
It reported a GAAP operating margin of -4.2% compared to -2.9% in Q4 2022. Conversely, the non-GAAP operating margin improved to 16.9% from 13.6% in the corresponding quarter last year.
The GAAP operating loss was $24.3 million, compared to $13.5 million in Q4 2022, while its non-GAAP operating income was $98.1 million, an increase from $64.0 million in the previous year’s fourth quarter.
Hubspot reported a GAAP net loss of $13.6 million, slightly improving from Q4 2022’s $15.6 million. On a non-GAAP basis, net income rose to $92.4 million, or$1.83 per basic share, and $1.76 per diluted share, compared to Q4 2022’s $56.8 million, or a basic EPS of $1.17 diluted EPS of $1.11.
The company ended Q423 with $104.3 million generated from operating activities, up from $90.0 million in Q4 2022.
HubSpot’s Fiscal Year 2023 Financial Performance
In fiscal year 2023, HubSpot reported a total revenue of $2.17 billion, a notable 25% increase from the preceding year. The GAAP operating margin was -9.6% compared to -6.3% in 2022, while the non-GAAP operating margin saw a notable increase, reaching 15.2% compared to 9.8% in the previous year.
The company reported a GAAP operating loss of $208.1 million, compared to $109.1 million in 2022, while the non-GAAP operating income soared to $330.3 million, up from $169.1 million in 2022.
In fiscal year 2023, HubSpot recorded a GAAP net loss of $176.3 million, or -$3.53 per share, a notable increase from the $112.7 million, -$2.35 per share reported in 2022. Conversely, non-GAAP net income jumped to $307.4 million from $141.8 million in 2022.
As of December 31, 2023, the company had $1.7 billion in total cash, reflecting a stable financial position.
HubSpot’s Q1 and Fiscal 2024 Forecast
HubSpot has released forward-looking projections for the first quarter of 2024 and the entire fiscal year. Revenue is expected to be between $596 million and $598 million in the first quarter. Non-GAAP operating income for this period is forecasted to be between $83 million and $84 million.
The estimated non-GAAP net income per common share is anticipated to fall between $1.48 and $1.50, based on approximately 53.1 million weighted average diluted shares outstanding.
Looking ahead to 2024, HubSpot expects total revenue to fall between $2.55 billion and $2.56 billion for the year. They anticipate non-GAAP operating income to range from $408 million to $412 million. Non-GAAP net income per common share is estimated to be between $6.86 and $6.94, based on around 53.6 million weighted average diluted shares outstanding.
HubSpot Stock Update
HubSpot (HUBS) is trading at $685.33 as of 12:29 pm on Thursday, reflecting a 9.36% increase from the previous day’s closing price of $626.70. Over the past year, the company’s shares have significantly increased with a 52-Week Change of 53.76%, outpacing the S&P500 52-Week Change of 26.95%. During the late afternoon trading session, the gain had narrowed to 5.80% with the shares trading at $663.04 as of 3:27 PM EDT.
Presently, HubSpot is trading above its 50-day Moving Average of $613.70 and its 200-day Moving Average of $534.63. The company boasts a market capitalization of $34.594 billion. Additionally, the average volume over the past 10 days is 489.98k shares. The forward Price-to-Earnings (P/E) ratio is reported at 87.72.
Is HUBS Stock a Buy?
The sharp rise in HubSpot’s shares, triggered by reports of Alphabet’s potential acquisition interest, illustrates the market’s responsiveness to strategic developments in the tech sector. As Alphabet works with Morgan Stanley to assess the deal’s feasibility, regulatory considerations loom large amidst heightened antitrust scrutiny.
HubSpot’s commendable financial performance and optimistic fiscal projections underscore its attractiveness as an acquisition target. Analysts have a favorable outlook, with a majority recommending buying shares, which reflects confidence in HubSpot’s growth trajectory amid evolving market dynamics.
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