Shares of HubSpot, Inc. HUBS is up 78.8% over the past year, driven by improved market demand across its portfolio thanks to a flexible business model and solid cash flow. Earnings estimates for the current and next fiscal year have risen 102.5% and 65.1%, respectively, since December 2022, implying strong inherent growth potential. With healthy fundamentals, this Zacks Rank #3 (Hold) stock looks poised for further appreciation. you can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Growth factors
Based in Cambridge, MA, HubSpot offers cloud sales and inbound marketing applications. The software-as-a-service (SaaS) provider helps businesses attract more customers through search engine optimization (SEO), social media, blogging, website content management, marketing automation, e-mail, customer relationship management (CRM), analysis and reports.
HubSpot is increasingly focused on collecting and enriching customers with rich, unified data from website visits, marketing emails, sales calls, and more. The acquisition of Clearbit, a B2B data provider for marketing intelligence, will further accelerate its vision. The integration of Clearbit’s dataset with HubSpot AI will facilitate the development of more powerful, advanced and accurate AI capabilities.
HubSpot’s inbound marketing and sales apps enable businesses to easily reach, acquire, and retain customers using traditional marketing tools like cold calling, print ads, and email. The company’s strategic priority is to deliver a world-class front-office platform by investing in anchor centers and innovating new emerging hubs. The growing adoption of inbound applications has helped develop the marketing agency partner network. Management’s focus on integrating generative AI to drive innovation and add more value to customers is likely to reap long-term benefits.
The company has significant reach in cross-selling its products to its existing customer base. The One HubSpot initiative is a key growth driver. In addition, HubSpot’s app marketplace offers a customer-centric solution, making it easy for businesses to find and seamlessly connect integrations to grow their businesses. As companies prioritize a digital approach, they are likely to create more opportunities for developers to create new integrations that support each stage of the customer journey.
It has released several updates to its Sales Hub product, including a low-priced entry level and an improvement to its sales engagement tools to make them more affordable for growing sales teams. In addition, the company has a large customer base that uses its products for free. Given the growing effectiveness of their inbound applications and innovative product portfolio, we believe many of these free customers will eventually choose to purchase HubSpot pro products for both their marketing and sales functions. This represents a significant growth opportunity for the company and will likely increase its margins.
It has a long-term earnings growth expectation of 30.6% and delivered an earnings surprise of 35.7%, on average, over the trailing four quarters.
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Key selections
Comtech Telecommunications Corp. CMTL, which carries a Zacks Rank #2 (Buy), is another solid pick. Headquartered in Melville, New York, the company is a leading global provider of next-generation 911 emergency systems and secure wireless communications technologies for commercial and government customers.
Comtech’s key satellite ground station modems incorporate forward error correction and bandwidth compression technologies, enabling its customers to optimize their satellite networks by reducing lease costs of the satellite transponder or increasing data.
Arista Networks, Inc. ANET, ranked No. 2 by Zacks, is likely to benefit from strong momentum and diversification across its core product lines and verticals. The company takes a data-centric, software-driven approach to helping customers build their cloud architecture and improve their cloud experience. Arista has a long-term earnings growth expectation of 20.4% and delivered an earnings surprise of 12%, on average, in the trailing four quarters.
It occupies a leading position in sharing 100 gigabit Ethernet switching per port for the high-speed data center segment. Arista is increasingly gaining market traction in high-performance 200 and 400 gig switching products and remains well positioned for healthy growth in the data-driven cloud networking business with proactive platforms and predictive operations.
AudioCodes Ltd. AUDC is another Zacks Rank #2 stock. It has a long-term earnings growth expectation of 24.8% and delivered an earnings surprise of 14%, on average, in the trailing four quarters.
Based in Lod, Israel, AudioCodes provides advanced communications software, products and productivity solutions for the digital workplace. It offers a wide range of innovative products, solutions and services used by large multinational companies and leading Tier 1 operators worldwide.
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