HubSpot (NYSE: HUBS) - American CRM system. Its revenue and quotes have grown strongly due to quarantine. But does it make sense to hope for further growth of shares?
What do they earn
HubSpot provides a suite of sales management solutions, marketing, as well as technical support. The company has free versions of most of its software, but full version, that is the most useful, costs money, and there are gradations of access: depending on the scale of the tasks to be solved, the cost of the subscription changes.
Here are its main software solutions:
- Marketing Hub - marketing process management. It's SEO, automation of promotion and mailings, social media marketing, as well as reporting and analytics in this area.
- Sales Hub - Operations Optimization Software, related to sales.
- Service Hub is relationship management with existing customers: chat rooms, collecting feedback.
- CMS Hub is a set of software tools for optimizing and managing online content.
- Operations Hub - business operations management, related to the processing of customer data.
According to the company's annual report, her earnings are divided as follows:
- Subscription - 96,6%. This, actually, using the HubSpot software: as separate programs, as well as a package. Segment gross margin — 84,68% from its proceeds.
- Professional services and more - 3,4%. Services for training personnel of client companies to work with HubSpot software, as well as services to support the business operations of clients, using HubSpot software. The segment is unprofitable - the cost of providing these services is almost 21% higher than the entire revenue of the segment.
Revenue by country and region:
- USA - 43%.
- Countries of Europe - 27,61%.
- Asian-Pacific area - 8,02%.
- Other countries in the Americas — 21,37%.
Arguments in favor of the company
All the same, but with pearl buttons. Since our super-successful investment idea, released in the spring 2020, when the stock went up 323% in just a year and a half, the company has increased its revenue and business margins quite well, even though it hasn't made a profit yet..
It has also increased the number of customers and the total volume of renewable revenue, which makes its business more stable.. As before, none of the clients give her more 1% proceeds, which protects her business from serious losses in the event of the departure of one of the clients.
So the company retained and developed all the strengths - there is undeniable progress. No reason to count, that the growth of the company will stop in the foreseeable future: the endless pandemic creates an endless demand for digitalization and moving activities online, that will continue to support the company's business.
In fairness, I note, that HubSpot had good prospects even without the pandemic, since companies were already motivated to actively spend on the development of the digital part of their business - simply for the sake of reducing costs and increasing labor productivity.
Can buy. In November 2021, messages appeared, what company can buy Amazon. It's hard to say now, how these rumors are justified and whether the purchase will take place.
In theory, HubSpot could very well be bought – if not by Amazon, then someone from private funds: the latter have a lot of free funds at their disposal and strong pressure from investors, waiting, that money will be spent in order to get a result better than the main stock indices.
The global volume of mergers and acquisitions is now very high, so HubSpot can actually be bought, although there are subtle moments.
What can get in the way
But still it's not the same. As Heraclitus said, You can't step into the same river twice. Now the company is worth in absolute terms very expensive - almost $ 32 billion.
Her unprofitability was not so conspicuous, when capitalization was less than 10 billion: at that time, HubSpot could be approached with the standards of a startup. But after its stock has nearly quadrupled in the past year and a half, the question is, to what extent the current price of the company is justified - after all, the company's revenue over the same period has not even doubled, but less. Still worth considering, that the company is still unprofitable, and this leads to serious volatility of these shares.
Might not buy. The company is expensive both in absolute, and in relative numbers - P / S about 26. In the technology sector, buying is usually not stingy, but still the value of many unprofitable startups often fluctuates between 10-15 billion dollars.
HubSpot, valued at $32 billion, won't give new owners much - big question, will it be possible to optimize the company after the purchase, to get a profitable business out of it.
Regarding the possibility of acquiring her Amazon, should be remembered that, that extremely tight-fisted gentlemen sit in Amazon - they have never bought anything more than 14 billion.
Amazon bought a catalog of 4,000 films and 17,000 episodes from the MGM film studio, along with its production facilities, for 8.45 billion. This is an incredibly good deal., if you remember, that rival streaming services Disney and Netflix are spending insane amounts of money to create their own content libraries.
Even a simple partnership with Affirm Amazon concluded in exchange for a ruinous deal for Affirm, during which the shareholders of the latter can lose up to several billion dollars.
With that in mind, I wouldn't hope, that Amazon will buy HubSpot at current rates: it costs too much and its acquisition will give too little.
Resume
HubSpot is a very interesting company, which has not yet exhausted its revenue growth potential. But her current score shows, that investors have unreasonably high expectations regarding it: HubSpot stands as a serious profitable company, staying, in fact, unprofitable startup.
For the same reason, the purchase of the company by someone with a significant premium to the current share price would be extremely unlikely - although this option cannot be completely ruled out.. All in all, you should think about buying a company only after its shares fall twice.
