In this LeftBrain Investment Research video, analyst Madhu Chaudhary provides a comprehensive investment overview of HubSpot (HUBS). She explains HubSpot’s product ecosystem—Marketing, Sales, Service, CMS hubs and a free CRM—targeted at B2B small‑to‑mid‑size firms. The addressable market for these SMBs in the US, Canada and Europe is estimated at $18‑$20 billion, while HubSpot serves under 80 k customers, indicating significant growth potential. The firm’s strategy includes expanding its product platform, launching an enterprise‑grade Marketing Hub, and leveraging a freemium model to convert low‑cost starter users into higher‑margin customers. Management is highlighted as a strength: co‑founders Brian Halligan (CEO) and Dharmesh Shah (CTO) retain 6.1 % ownership, aligning their interests with shareholders. Financially, revenue grew from $116 M in 2014 to $675 M in 2019 and operating income turned positive, reaching $55 M. The stock trades at a 17.3× price‑to‑sales multiple, a premium the analyst deems justified by quality and growth prospects. Concluding, the analyst gives HubSpot a “green‑light” rating, recommending it for long‑term investors despite the valuation premium, and invites viewers to visit leftbrainii.com for more insights.
Chapters
Hello everyone and welcome to First Focus from LeftBrain Investment Research. I'm Madhu Chaudhary, investment analyst here at LeftBrain. I'm here to give you my recent insights on HubSpot and conclude my report with thoughts on whether the stock makes for a good investment. Let's start by reviewing what HubSpot actually does. HubSpot provides inbound marketing, sales, customer service software solutions primarily to B2B companies. Its clients are typically small to mid-sized companies looking to grow their business using digital means such as social media, search engine optimization, email, or website. The company's solutions are easy to use and are scalable. HubSpot has transformed into a company with multiple products, or hubs as they call them. These include Marketing Hub, which helps customers with everything from search engine optimization to landing pages for marketing campaigns. Sales Hub, which helps businesses convert leads generated into customers. Through emails, meeting, call scheduling. Service Hub provides tools that businesses need to maintain conversation with existing customers. CMS allows businesses to create and maintain websites. And finally, the company also provides a free CRM software solution. Let's examine the market opportunity for the company. There are over 3 million small to mid-sized businesses across the US, Canada, and Europe. HubSpot, on the other hand, has just under 80,000 customers. Implying several years of growth ahead. The company's addressable market is valued between $18 and $20 billion, and it clocked just under $700 million in 2019. So what is HubSpot doing to capitalize on the growth opportunity? The company started with a narrow focus. However, over the years, it has expanded into multiple product areas within the front office segment of a business, further cementing its relationship with its clients and expanding its overall market opportunity. The company is also investing in its product platform. It launched an updated version of its marketing hub enterprise with advanced features to expand its appeal to enterprises, which have so far been a small portion of its client mix. The company has enterprise customers such as DoorDash and VMware and is looking to add more such large clients in the future. Finally, it follows a freemium policy where it has low-cost starter packages to convert prospective clients into clients, and then it gradually looks to increase revenue from those accounts via additional product sales and by moving those clients to premium tiers. Let's have a look at the company's management. The company CEO is Brian Halligan and CTO is Dharmesh Shah, who are also the company's co-founders. The fact that both the company's founders are still steering the ship and have skin in the game as they together own 6.1% of the company is a strong positive and adds to our confidence. Now that we have a clear picture of the company's business strategy and drivers, let's use a snapshot that translates into financials. Revenue has grown from $116 million in 2014 to $675 million in 2019. And operating income has expanded from negative $32 million in 2014 to positive $55 million in 2019. The last critical piece of this puzzle is the stock's valuation. The company's stock trades at a price-to-sales multiple of 17.3 times, which is at a premium, but in our mind, this premium is justified due to the quality of the company and its growth opportunities. So what does all this mean for HubSpot stock? Given the company's solid execution, the growth opportunity ahead, and its excellent management team, we believe the company's stock offers upside to long-term oriented investors despite its current premium valuation. With the long term in mind, LBIR feels the company is well positioned and we're giving HubSpot a green light rating. For more investment insights with a view through the left brain lens, visit us at leftbrainii.com to like, share, and subscribe. Be a part of a growing community of left-brainers who experience the informed decisions and independent thought that powers our search for profitable investment opportunities. This is Madhu Chaudhary for First Focus from Left Brain Investment Research. Thanks for watching, and I'll see you soon with more investment insights.
