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Can HubSpot (HUBS) Pull a Surprise this Earnings Season?

HubSpot Inc.HUBS is set to report fourth-quarter 2015 results on Feb 10. Last quarter, the company incurred a loss per share of 40 cents, which was narrower than the Zacks Consensus Estimate of a loss of 45 cents. With respect to earnings surprise, the stock has a positive four-quarter average of 10.38%.

Let's see how things are shaping up for this announcement.

Factors at Play

HubSpot offers inbound marketing software platform that helps companies attract traffic to their websites, convert visitors into leads and close leads into customers. We are encouraged by the company's focus on investing in product development and international expansion which should boost the top line in the fourth quarter.

Notably, HubSpot's total customer base grew more than 35% on a year-over-year basis to 16,854 in the third quarter. Moreover, average subscription revenue per customer increased to $10,607 in the third quarter from $9,183 a year ago. This trend should continue in the to-be-reported quarter as well.

Moving ahead, buoyed by the better-than-expected third-quarter results, HubSpot raised the 2015 outlook. The company now expects revenues in the range of $178.5 million to $179.5 million, up from $171.7-$173.7 million.

HubSpot lowered its loss per share forecast to a range of 78-80 cents from 88-92 cents.

For the fourth quarter, HubSpot projects revenues between $49.7 million and $50.7 million. Moreover, non-GAAP loss per share is likely to range within 17 cents to 19 cents.

However, we remain cautious about the bottom line in the fourth quarter owing to higher customer acquisition costs.

Earnings Whispers

Our proven model does not conclusively show that HubSpot is likely to beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: The Earnings ESP for HubSpot is 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 34 cents per share.

Zacks Rank: HubSpot currently has a Zacks Rank #3 which when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Here are some companies which you may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:

InterDigital, Inc. IDCC , with an Earnings ESP of +33.33% and a Zacks Rank #3.

Yelp Inc. YELP , with an Earnings ESP of +33.33% and a Zacks Rank #3.

Boyd Gaming Corporation BYD , with an Earnings ESP of +7.14% and a Zacks Rank #2.

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BOYD GAMING CP (BYD): Free Stock Analysis Report

HUBSPOT INC (HUBS): Free Stock Analysis Report

INTERDIGITL INC (IDCC): Free Stock Analysis Report

YELP INC (YELP): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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