HubSpot is the IBD Stock of the Day as the software maker bounces off a key technical mark. HubSpot stock has soared in 2023 amid a rally in software companies that recently lost some momentum.
Cambridge, Mass.-based HubSpot sells sales and marketing software to small and midsize businesses. It focuses on digital channels such as blogs, internet search engines and social media.
With roots in marketing software, it has expanded into customer relationship management as well as payment services.
On the stock market today, HUBS stock gained 1.7% to close at 524.68. HubSpot stock trades just below a traditional four-weeks-tight entry point of 535.12. HubSpot stock has shot up 83% in 2023.
Software Growth Stocks Rebound
But HubSpot recently bounced off a key technical mark, its 21-day exponential moving average. As a result, HUBS stock has passed a more aggressive entry point of 522.20. That's based on a high set on June 23. IBD research has found that with the biggest stock market winners, they tend to find support at the 21-day line after a breakout for at least several weeks.
Software growth stocks were back in favor in the first half of 2023, boosted by buzz over artificial intelligence, or AI. But software stocks have pulled back recently amid the Federal Reserve's hawkish tone on interest rates and inflation.
After tumbling more than a third in 2022, the iShares Expanded Tech-Software ETF — comprised of many of the major enterprise software players — is up 33% this year.
In fiscal 2023, analysts predict earnings growth of 74% to $4.84 a share for HUBS stock. Revenue will grow nearly 21% to $2.09 billion, according to analyst estimates from FactSet.
HubSpot aims to attract people to customer websites and optimize content so that visitors are converted into paying customers. In the high end of the market, HubSpot competes against Salesforce and Adobe Systems.
HUBS Stock: AI Opportunity
Some analysts view the software company as an AI stock to watch. HubSpot could get a boost from "generative AI" technologies such as ChatGPT.
Generative AI technology creates text, images, video and computer programming code. The new form of AI technology already is finding applications in marketing, advertising, drug development, legal contracts, video gaming, customer support and digital art.
HubSpot's Relative Strength Rating is 96 out of a best-possible 99, according to IBD Stock Checkup. The best stocks tend to have an RS Rating of 80 or better.
In addition, HubSpot stock has an Accumulation/Distribution Rating of B-. The rating analyzes price and volume changes in a stock over the past 13 weeks of trading. On an A+ to E scale, the rating measures institutional buying and selling in a stock.
An A+ signifies heavy institutional buying; E means heavy selling. Think of the C grade as neutral.
HubSpot Stock: Restructuring Move
In 2022, HubSpot's customer base grew 24% to 167,386 businesses. Morgan Stanley forecasts that HubSpot's customer base will nearly double to reach 322,520 businesses by 2027.
"The combination of durable 25%-plus revenue growth against a large market opportunity and an increasing prioritization of margin expansion sets the stage for an accelerating free cash flow story," Morgan Stanley analyst Elizabeth Porter said in a recent note to clients.
HubSpot in January announced a restructuring plan to reduce operating costs and drive better profitability. The company reduced its workforce by 7%, or about 500 employees. Also, HubSpot consolidated some leases to generate savings on its real estate footprint.
One question for HubSpot is when its new payment business will generate material sales.
In 2021, the company announced plans for HubSpot Payments, a business-to-business service. HubSpot Payments is embedded into its customer relationship management software platform.
HubSpot partnered with well-funded payments startup Stripe to launch the service.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
