IBD Stock Analysis
Investors may be better off waiting for volume to pick up before purchasing.
All data was taken at 1:48 PM EDT on 03/17/2023.
The IBD Stock of the Day is HubSpot (HUBS), as the software company hovers close to a buy point amid hype over "generative" AI technology and AI stocks. HUBS stock outperformed other software growth stocks in 2023. However, it fell back in March after a huge run.
HubSpot, a Cambridge-based company that sells marketing and sales software, is available to small and medium businesses. It focuses on digital channels like blogs, social media and internet search engines.
In 2023, HubSpot stock gained 37% The iShares Expanded Tech Software ETF (IGV), which includes many of the largest enterprise software companies, is now up 12% after falling more than a quarter in 2022.
HUBS stock rose on the news of its fourth-quarter outlook and earnings report. Earnings rose 91% to $1.11 per share. Revenue rose 27% to $470million
Friday's shares fell to 398.13.
Stock Support from HUBS
HubSpot trades below the entry point of 399.65. HUBS stock has been retracing recently but found support at the 21-day exponential moving mean. IBD research shows that the largest stock market winners tend to find support at the 21 day after a breakout lasting at least several weeks.
Its relative strength line remains in the same area that HUBS stock traded before the earnings beat. Investors may wait to see if volume increases before they take a position.
HubSpot's goal is to drive people to customer websites, and to optimize content so they convert into paying customers. HubSpot recently expanded its marketing capabilities to include sales automation and customer relations management products.
HubSpot competes with Adobe Systems (ADBE) and Salesforce (CRM).
HubSpot and Generative AI Stocks
Analysts consider the company one of the top AI stocks to monitor. HubSpot could benefit from ChatGPT and other "generative AI" technologies.
Generative AI technology generates text, images and video. This new type of AI technology is already being used in marketing, advertising and drug development. It also has legal contracts, video games, customer support, and marketing.
HubSpot announced in February that it was testing ChatSpot.ai and "content assistant".
In a note to clients, Alex Zukin, Wolfe Research analyst said that "a significant number of customer service and marketing use cases can be solved immediately with (generative AI)." Automated content creation can help marketers save time and improve their processes with email blasts, blog posts, and display ads.
HubSpot's relative strength rating is 93 out the best 99. Stocks with a RS Rating greater than 80 are considered the best.
This rating is based on price and volume changes over the last 13 weeks. The rating is based on institutional buying and selling of stock. It ranges from A+ to E.
A+ means institutional buying. E is for heavy selling. The C grade is neutral.
Restructuring Move for HUBS Stock
HubSpot announced in January a restructuring plan to lower operating costs and improve profitability. HubSpot reduced its workforce by approximately 500 people, or 7%. HubSpot also consolidated leases in order to save money on its real-estate footprint.
HubSpot projects 2023 earnings of $4.24 to 4.32 per share. The company anticipates revenue between $2.05 billion and $2.06 billion.
Gabriela Borges, a Goldman Sachs analyst, stated that HubSpot "believes it is still in its early innings of driving operating margins higher." She made this statement in a note.
Analyst Brad Sills at Bank of America views HUBS stock a market share winner.
HubSpot has the potential to grow mid-20s revenue by continuing execution through multiple channels and consolidating the vast SMB (small- and medium-sized business) front office app market with the leading platform," he wrote in a note.