Today we have an extremely speculative idea.: take shares of HubSpot cloud business (NYSE: HUBS), to capitalize on the rebound of these stocks after the strongest decline.
Growth potential and validity: 20% behind 14 Months; 51% behind 3 of the year; 84% behind 7 years.
Why stocks can go up: they fell hard, which increases the likelihood that the company will be bought by someone bigger.
How do we act: we take shares now by 456,28 $.
When creating the material, sources were used, inaccessible to users from the Russian Federation. We hope, Do you know, what to do.
No guarantees
Our reflections are based on the analysis of the company's business and the personal experience of our investors, but remember: not a fact, that the investment idea will work like this, as we expect. Everything, what we write, are forecasts and hypotheses, not a call to action. To rely on our reflections or not – it's up to you.
And what is there with the author's forecasts
Research, like this and this, talk about, that the accuracy of target price predictions is low. And that's ok: there are always too many surprises on the stock exchange and accurate forecasts are rarely realized. If the situation were reversed, then funds based on computer algorithms would show results better than people, but alas, they work worse.
So we're not trying to build complex models.. The profitability forecast in the article is the author's expectations. We specify this forecast for the landmark. As with the investment idea in general, readers decide for themselves, it is worth trusting the author and focusing on the forecast or not.
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Investment editorial office
What the company makes money on
HubSpot makes sales management software, marketing and technical support. Her business operates on a subscription model.. We explained the structure of the company's business in more detail in our last review., so we won't repeat ourselves here.. The main thing is that the company is unprofitable.
Arguments in favor of the company
Fell down. Since November 2021, the company's shares have fallen heavily under the weight of its obscene price.: from 841 to 456,28 $. Think, that such a large drop is a good opportunity to pick up these stocks in the expectation of a rebound.
Well, as it grows. The company's impressive revenue growth coupled with the gradual increase in its margins give many analysts and investors the impression, that HubSpot has a great future as an independent company.
Many more fans of “promising” companies can run into the stock, especially after such a strong drop in quotes. The company seems outrageously expensive to me even after the recent stock drop., but it is unlikely that my opinion coincides with the opinion of lovers of "promising" and "high-tech".
Can buy. Huge drop in Hubspot stock could attract a buyer, who will fulfill the dream of all loss-making companies and buy HubSpot.
In absolute numbers, HubSpot is expensive: capitalization 21.84 billion dollars. But, considering the need of the largest US technology businesses to diversify business for political reasons, i would expect, that HubSpot will receive an offer to buy from, say, Google, who persistently develops her own cloud business and does not consider expenses.
And it's all about luck: a strong drop in HubSpot quotes is superimposed on an "arms race" between the largest players in the cloud computing market. So buying HubSpot is a very likely scenario..
What can get in the way
Strictly speaking, falling quotes and the possibility of buying HubSpot by someone bigger are the only arguments in favor of the company. But there are many more arguments against.
The high growth rate of its revenue does not negate the fact, that it is unprofitable and is still prohibitively expensive: her P / S even now is very high - 18,1. These stocks could very well fall once, if not twice., then one and a half.
Actually, the drop in the company's shares over the past two months is due to, what investors, who bought them earlier, very reasonable profit taking. Probably, they are concerned about the discrepancy between the value of the company and its real position. HubSpot stands as a full-fledged serious business, but she, in fact, unprofitable startup. All in all, the company's shares will be in a fever and the threat of bankruptcy is quite real here.
Well, or the shares may still fall one and a half times and HubSpot will be bought after that - for us this will be a very undesirable option..
What's the bottom line?
You can take shares now by 456,28 $. Then there are three options:
- wait for the price 555 $. Think, what are the next 14 months, the company will receive an offer to buy and a premium of 20% to the current price will be more than enough in the case of HubSpot;
- pluck up the nerve and wait for the stock to return to the price 700 $. Here you should be prepared to wait for about 3 year - and this option is only suitable for those, who really believes in the company. I don't believe, for example;
- become completely insolent and hold the stock until it returns to the price 850 $. Think, it's better to time it 7 years. This option is only for those, who counts, that HubSpot has a great future as an independent company. Here I also adhere to the position from the second point..
But anyway, keep in mind, that the idea is very volatile, and if you're not ready, that the stock will shake, don't touch them at all.
