Customer relationship management stock HubSpot gapped up and hit a buy point Friday, but that breakout took a step back Monday. The company, Tuesday's IBD 50 Stocks To Watch pick, posted positive Q4 earnings and guidance late Thursday.
HubSpot specializes in marketing lead generation and analytics, sales and payments automation, SEO recommendations and data syncing. The Cambridge, Mass.-based firm serves over 167,000 customers in over 120 countries, in six languages.
Their product hubs are broken into marketing, sales, service, CMS and operations, and also offer some free online tools.
The cloud-based CRM stock holds the third place out of 38 stocks in the specialty enterprise software group. The group ranks 77th out of 197 IBD industry groups. While that's not in the leadership rungs, the group rose from the No. 107 spot four weeks ago and gained 15% year to date.
HubSpot Hits Buy Point After Q4 Earnings
HubSpot gapped up 11.8% Friday in the largest volume since August, following its Q4 earnings release and positive guidance late Thursday. Shares hit the 399.65 buy point of a long, deep cup-with-handle base Friday, but retreated below the entry Tuesday amid a stock market sell-off.
Note that both the cup and the handle components are deeper than ideal for a cup-with-handle base.
HUBS found support at its 21-day exponential moving average as it formed the handle.
Shares gained 33% year to date, but have a long way to go to reach the November 2021 all-time high of 866. The stock is also about 29% off its 52-week high.
The 91 Relative Strength Rating means the stock has outperformed 91% of stocks in the IBD database, and improved from a 75 rating four weeks ago.
Quarterly Earnings Keep Strengthening
Fourth quarter adjusted earnings per share grew 91% over the prior year, with quarterly EPS growing five out of the last six quarters.
Quarterly sales growth decelerated to 27% in Q4, from 31% and 36% in the prior two quarters. Subscription revenue rose 28% over the prior year quarter, while full year 2022 it increased 34%. The number of customers grew 24% during 2022.
HubSpot announced in late January it would lay off about 500 employees, or 7% of the workforce, and consolidate leases as part of a cost-cutting plan.
"We grew head count faster than revenue in a number of teams. We were optimistic about our head count growth and underestimated the impact of the slowdown in 2022," said CEO Yamini Rangan.
Full-year 2022 EPS grew almost 60% from 2021, while analysts expect impressive 43% 2023 EPS growth, and 31% in 2024. On the other hand, free cash flow dropped to $191.4 million in 2022 from $203.3 million in 2021.
Mutual Funds and Analysts Climb Onboard
The overall positive report prompted Credit Suisse, Needham, Raymond James and Mizuho to raise their price targets on the stock.
Mutual funds own 66% of the CRM shares, with 1,428 funds holding shares in December from 1,413 funds in September.
HubSpot was voted the No. 2 Best Place to Work in 2022 by Glassdoor.
Follow Kimberley Koenig for more stock news on Twitter @IBD_KKoenig.
