Founded in 2006, HubSpot (NYSE: HUBS) develops and markets software products for sales and inbound marketing. The Cambridge, Massachusetts-based company is a power player in content marketing, social media marketing, search engine optimization (SEO) and web analytics. HubSpot is currently priced at $73. The stock is $5 away from its 52-week high of $78.50.
Don’t be scared away by the high price. Here’s why HubSpot is worth investing in.
The Rise of Inbound Marketing
This inbound marketing superstar is rapidly amassing subscriptions. As of September 2016, HubSpot has more than 31,000 customers.
The company’s margins are quite impressive across the board. Inbound marketing is on the upswing, and HubSpot is poised to benefit from this trend for years and decades to come.
Consider the following statistic: Organizations across the globe spent nearly $30 million on content marketing last year. The purpose of content marketing is to attract prospects with intriguing, helpful or educational information provided on the web. In this field, HubSpot is a pioneer in every sense of the word.
Content marketing is one of the major building blocks of inbound marketing. As an example, a blog post, editorial or social media post containing helpful or intriguing information draws in prospects on the web. These already-interested parties are actively seeking out information on the internet. Such prospects are inclined to convert to paying customers. According to a 2016 Demand Gen Report, nearly half of all buyers read or skim between three and five online articles prior to engaging in the sales process. This means high-quality online content is essential to sales. HubSpot is in the cat bird’s seat when it come to content marketing.
HubSpot’s Business Model
HubSpot helps businesses connect to their target customers on the web to make the best possible impression. The company offers three products for inbound marketing and lead generation. Known as the “growth stack”, these products are designed to catalyze client sales in the most efficient manner possible.
The company’s no-cost customer relationship management is ideal for small and medium-sized businesses. This product is offered on the web just like every other HubSpot service. The company also offers premium products like a signature marketing suite and a sales tracker. These products range from blogging software to SEO services and social media marketing tools.
Customers pay for HubSpot services through subscription fees. Additional fees are charged if the number of contacts attained and tracked surpass thresholds. Even more revenue is made with the purchase of additional subscriptions, products, services, extra accounts, website visits etc.
Watch It Grow
HubSpot’s business model is working to near perfection. The company’s marketing subscriptions have increased upwards of 34 percent across the past four years. HubSpot’s gross margin has jumped 10 percent from ’12 to ’16. Subscription revenue per customer increased nearly 20 percent on a year-over-year basis. The company’s marketing customer base expanded by nearly 30 percent in the second quarter of ’17. Marketing per customer jumped nearly 7 percent in this same period.
There is no indication that HubSpot’s rapid growth will taper off any time soon. This is a business positioned for considerable growth in the short-term as well as the long-term. The bottom line is the web is becoming increasingly ubiquitous thanks to the rise of internet-connected mobile devices and affordable computers.
People are turning to search engines and social media to find products and services. HubSpot connects these customers to businesses. If the company plays its cards right, it will continue to grow quite rapidly in the upcoming months, years and decades.
What’s the Catch?
HubSpot executives have made it known they will redirect operating cash flow back into the company’s operations. This decision has the potential to cause a few disruptions. However, putting cash back into the business is prudent as inbound marketing has not yet reached its peak. HubSpot’s cloud software platform will receive a large portion of this reinvestment.
Those who buy and hold HubSpot for the long haul will likely make a tidy sum of money. This business has the potential for a yearly growth rate of 20 to 25 percent across the next half-decade. So don’t dwell on the company’s expensive stock price or plans for operating cash flow.
Focus on HubSpot’s remarkable growth, hold on for the long haul and you are almost certain to emerge with a significant return on your initial investment.
Regards,
Ethan Warrick
Editor
Wealth Authority
