BofA boosts HubSpot's price target amid SMB market showdown

In Boston, on December 12, 2024, an analyst from BofA Securities hosted HubSpot's CEO Yamini Rangan for investor meetings. During these discussions, the analyst expressed a bullish perspective on HubSpot's growth potential, particularly within the small to medium business (SMB) market, where SMBs account for approximately 55% of total software spending. The analysts' Buy rating and raised price target reflect confidence in the company's ability to reaccelerate growth, potentially reaching mid-20s percentages supported by advancements in artificial intelligence (AI) and overall macroeconomic improvement as the company approaches fiscal 2025. HubSpot is also focused on consolidating the SMB segment of the Customer Relationship Management (CRM) market with a unified platform designed for speed and ease of use. HubSpot's platform centers on building applications that incorporate a common ecosystem, embedded AI, and unified data. This strategy allows the company to seamlessly and swiftly implement new features, agents, and copilots across its multiple hubs. When acquiring smaller companies, HubSpot rewrites the underlying code to align with its platform optimized for AI-enabled capabilities. Furthermore, HubSpot adopts an agnostic approach to large language models (LLMs) supporting its Breeze AI platform, which enables the integration of preferred AI options from customers. Currently, HubSpot has four agents in beta – covering areas like customer support, content creation, social media management, and prospecting, with customer and support functionalities gaining substantial traction. The anticipation is that improvements in features such as copilots and agents will likely contribute positively to various key growth metrics, encompassing aspects like gross retention and new customer acquisition. There is an expectation that new AI features could eventually lead to direct revenue opportunities through distinct offerings. Additionally, recent years have seen HubSpot enhance its focus on partner and sales enablement, which is predicted to foster further growth when customers resume their own growth strategies. Early signs indicate healthy upgrade activity among customers related to HubSpot's refreshed pricing model, which introduces a lower entry point and upgrade costs for individual users. As macroeconomic conditions improve over time, increased activity in upgrades under this new pricing system is anticipated to maximize potential growth across multiple years. As of recent reports, HubSpot shares have gained 2.56%, closing at approximately $740.31.