Cloud software provider HubSpot is Thursday's IBD 50 Stocks To Watch pick. The customer relationship management (CRM) stock climbed off its August lows and reclaimed a key level on its chart.
HubSpot develops CRM software that combines marketing, sales, customer service, content, operations and commerce in a single platform.
Its system of five modules, called hubs, can be used alone or bundled together. The platform is used for hosting webpages, creating blogs, managing sales leads and customers, and analyzing and tracking user behavior.
The company announced its new HubSpot AI suite of generative AI tools at its analyst day Wednesday. The event showcased new products, with a focus on generative AI tools.
"With HubSpot AI, we're taking the guesswork out of generative AI and giving all customer-facing teams across sales, marketing, and service the complete tool kit to help them accomplish even more," said Andy Pitre, executive vice president of the Product division.
HubSpot holds the No. 1 spot out of 39 stocks in the enterprise software industry group. The group is ranked a high 21 out of 197 IBD industry groups.
Cloud Software Stock Recovers
Wells Fargo, Mizuho, BofA Securities, JPMorgan and several other analysts raised their price targets on the cloud software stock Thursday. The fresh institutional conviction lifted the stock 1.2% on an overall tough day for the market.
HUBS stock hit a 52-week high of 581.40 just two days before the company's second-quarter earnings release. Shares plunged 11.4% in heavy volume Aug. 3, despite a positive earnings report and guidance the day prior. The move sent the cloud software stock below its 50-day moving average.
But HubSpot has clawed its way back from the sell-off and reclaimed its 50-day line on Aug. 29. Shares appear to be forming a cup base.
The stock has gained 90% this year so far and is around 5% off the July 31 high.
Earnings Grew 205% In Recent Report
The company's earnings growth accelerated at a rapid pace the last four quarters. Its Q2 EPS grew a whopping 205% over last year's quarter, up from 38%, 91% and 122% gains the previous quarters.
Q2 sales grew 25%, but growth has slowed. The number of customers in Q2 grew 23% over the prior year. Its Q2 free cash flow grew to $59.6 million vs. $22.4 million.
Analysts expect an impressive 90% EPS growth this year and 22% next year, according to FactSet.
Mutual funds own 63% of shares with 1,657 funds holding the software stock in June, up from 1,532 in March and 1,434 in December. Management has a 5% stake in the company.
Lastly, the company earned best-possible 99 IBD Composite and EPS Ratings.
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