Hubspot (HUBS) Looks Promising on Upbeat Q3: Should You Buy?

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Hubspot, Inc.HUBS shares have been rallying since third-quarter fiscal 2018 earnings release on Nov 7.

Shares of Hubspot have gained 43.9% in the past year against the industry 's decline of 0.9%. Its impressive price performance can be attributed to its laudable earnings surprise history. The company surpassed earnings estimates in the trailing four quarters, recording average beat of 90.1%. The company has a long-term expected EPS growth rate of 50%.

Revenues of $131.8 million surged 34.9% (35% on a constant currency basis) year over year in third-quarter 2018. The figure surpassed the Zacks Consensus Estimate of $127 million as well as the guided range of $125.6-$126.6 million.

Year-over-year growth in revenues can primarily be attributed to expanding customer base, which increased 40% to 52,505, and lower attrition rate in the reported quarter. Moreover, higher Subscription and Professional services revenues positively impacted the third-quarter's revenues.

Encouraging Outlook

HubSpot forecasts revenues in the range of $136.5-$137.5 million for fourth-quarter 2018. The Zacks Consensus Estimate is pegged at around $137.6 million.

Moreover, the company anticipates non-GAAP net income per share to be in the range of 29-31 cents. The Zacks Consensus Estimate is pegged at 30 cents per share.

For full-year 2018, HubSpot updated guidance. The company now anticipates revenues in the range of $505.5-$506.5 million (previous guidance $496.8 million to $498.8 million). The Zacks Consensus Estimate is pegged at $505.8 million.

Non-GAAP net income per share is now anticipated to be in the range of 80-82 cents (previously 63-67 cents). The Zacks Consensus Estimate is pegged at 80 cents per share.

Growth Drivers

Management notes that third party integrations with companies including the likes of Shopify SHOP , Slack, among others are on track. ServiceHub, launched recently, is anticipated to boost third-party integrations, going forward with services like ZenDesk and Intercom.

The company is optimistic regarding the adoption of ServiceHub. The new solution is part of HubSpot's free CRM. It offers companies comprehensive details of a customer's journey, eventually increasing customized solutions.

The new Slack integration offering is anticipated to bolster adoption. The offering is aimed at transforming Slack conversations to HubSpot CRM Tasks, in turn enhancing productive tasks.

In the last reported quarter, the company garnered a multi-year contract win with total contract value exceeding $1 million.

Management is also elated on the traction gained by newly introduced Marketing Hub Starter. Notably, the new starter product was recently enhanced by addition of an email feature.

We believe portfolio expansion and collaborations bode well. Adoption of Google cloud remains a positive. Moreover, integration of its various in house offerings is likely to improve subscription levels going ahead, consequently bolstering the top line.

Bottom Line

A successful investor understands the importance of adding well-performing stocks in the portfolio at the right time. Indicators of a stock's bullish run include a rise in share price and strong fundamentals. Consequently, investment in this this Zacks Rank #2 (Buy) stock will be a lucrative option at least for the time being.

Some other top-ranked stocks in the broader technology sector are Infineon Technologies AG IFNNY and QUALCOMM Incorporated QCOM , both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Infineon Technologies and QUALCOMM have a long-term expected earnings growth rate of 8.6% and 11.5%, respectively.

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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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