The Bull Market Is Official: 1 Remarkable Growth Stock to Buy Now and Hold Long-Term | The Motley Fool

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Investors should buy a few shares of this growth stock before it rides the bull market higher.

In January, the S&P 500 hit a record high for the first time in two years. Crossing that threshold made the bull market official, and it portends more upward momentum in the future. The S&P 500 returned an average of 285% during the last five bull markets, according to Yardeni Research, and many stocks are sure to rise during the current one.

Investors hoping to capitalize on that upward momentum should be buying stocks today, and HubSpot (HUBS -0.10%) stands out as a compelling idea at its current valuation. Here’s what investors should know about this remarkable growth stock.

HubSpot provides customer relationship management (CRM) software. Its platform includes productivity applications for marketing, sales, and customer service, as well as solutions for content management and payments. Those tools help businesses engage leads across multiple channels (search, social media, and websites), convert leads into paying customers, and maintain lasting customer relationships.

HubSpot has positioned itself as a niche CRM leader by following a sensible strategy. First, it targets underserved small and mid-market businesses (SMBs) with freemium pricing that allows for graduation to more advanced features when needed. Second, its integrated platform is more efficient than disconnected point products because it eliminates the hassle of learning and maintaining multiple systems. Third, HubSpot is a champion of inbound marketing.

Inbound marketing replaces traditional outbound strategies (like email blasts and pop-up ads) with more subtle tactics. It creates brand awareness by surfacing helpful materials (like informative articles and videos) when potential customers are looking for them. In other words, outbound marketing pushes advertising at consumers, while inbound marketing pulls consumers in with useful and engaging content.

That strategy has earned HubSpot a leadership position in sales and marketing automation software among SMBs, according to Morningstar. Additionally, research company G2 named HubSpot the best global software seller in 2023 based on high user satisfaction and market presence scores. That means HubSpot outranked software giants like Microsoft, Salesforce, and Adobe.

Additionally, HubSpot ranked No. 15 on the Fortune Future 50 List in 2023, a yearly assessment of the largest companies in the world based on long-term growth prospects.

HubSpot reported solid results in the third quarter. Its customer count increased by 22% to 194,000, and the subscription revenue per customer increased by 3%. In turn, revenue rose 26% to $557 million, and non-GAAP (adjusted) net income more than doubled to reach $83 million. Investors should expect a similar growth trajectory in future quarters as the company leans into its bimodal go-to-market strategy.

To elaborate, HubSpot plans to grow its business by (1) targeting SMBs with freemium pricing and starter products, and (2) pushing upmarket by building more advanced products for larger businesses. For instance, the company recently relaunched its sales software with more sophisticated prospecting and deal management capabilities. That comes on the heels of a service software relaunch in the previous year.

Additionally, in September, HubSpot announced a wave of artificial intelligence (AI) innovations that will automate tasks and surface insights across its CRM platform. For instance, HubSpot AI lets clients forecast sales, create marketing campaigns, respond to customer service inquiries, and construct webpages. HubSpot also introduced ChatSpot, a generative AI assistant built on ChatGPT that can retrieve information, run reports, and create written content like blogs and emails.

HubSpot valued its addressable market at $51 billion in 2023, and the CRM market is forecast to grow at 14% annually through 2030, according to Grand View Research. HubSpot should beat the industry average given its strong presence among SMBs, its push upmarket, and its rapid product development capabilities, as evidenced by its quick turnaround time on AI.

To quote JPMorgan Chase analyst Mark Murphy, “Only a few months since generative AI has come into the limelight, HubSpot has developed a generative AI solution that can save a service rep a full day’s worth of work (assuming an eight-hour workday) per week.”

On that note, Wall Street expects the company to grow sales at 21% annually over the next five years. That consensus estimate makes its current valuation of 14.7 times sales look reasonable, especially when the three-year average is 16.6 times sales. Investors with a five-year time horizon should feel comfortable buying a small position in this growth stock today.

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