23:28 GMT+3 / 30.11.2023

Get ready to buy more technologies: HubSpot, BlackLine and New Relic

HubSpot (HUBS)

Now it is difficult to find a technology firm that has avoided difficulties due to the difficult macroeconomic situation. Rising interest rates, large-scale staff cuts, fears of recession - all this forces customers to tighten their belts and save on new IT solutions, and investors are wary of developer stocks. Nevertheless, few people are willing to argue with the fact that difficult times will end sooner or later, while the demand for technological products will only grow.

HubSpot (HUBS)

The securities of HubSpot, the pioneer of “inbound marketing”, are trading 40% below the price peak, although they have been actively growing since the beginning of this year. Despite the annual revenue of $2 billion, the company manages to grow by 30% YoY. Where do these numbers come from? It's all about the specifics of HubSpot, where they offer businesses to promote their brand through “soft” marketing, for example, creating useful content on social networks, rather than annoying advertising and cold sales, which rather irritate potential customers.

The main question is whether the company's revenue will grow at the same impressive pace in the near future? Considering that the size of the potential market is estimated at $72 billion, and HubSpot covers only about 3% of this volume, we can give an affirmative answer. In the first quarter of 2023, the number of customers increased by 23% YoY to 177.3 thousand, largely due to the conversion of users of the free version of the platform into paid subscribers.

HubSpot is actively cutting costs by suspending hiring, reducing staff and implementing remoting. All this contributes to the increase in profitability - the operating margin in the reporting quarter reached 13.5% against 8.8% a year earlier. As we can see, there is a lot to grow, and with it, the HUBS shares, which will attract more and more attention from investors.

BlackLine (BL)

The securities of BlackLine, a developer of accounting automation products, are trading 65% below the highs. On the one hand, companies are cutting budgets for technological innovations, which negatively affects BlackLine's revenue, and on the other hand, large-scale layoffs of employees, including clerks from financial departments, should lead to increased demand for more cost-effective digital solutions to optimize document flow. Thus, the shares are of increased interest to long-term investors.

The company's services are used by representatives of various industries. For example, among its clients are such firms as Chevron, Salesforce, Boeing and many others. Such versatility is a key factor in the success of BlackLine, which allows you not to depend on any one direction. In addition, a large number of well-known corporations among customers makes it possible to effectively move among the SME segment, from where the bulk of new customers will come in the foreseeable future. The total size of the target market is estimated at $28 billion, while the current size of BlackLine's annual revenue is only about $500 million.

New Relic (NEWR)

Since the end of 2021, New Relic shares have fallen by 45%, despite an extremely promising field of activity: monitoring the operation of applications for the purpose of rapid recognition of security threats and timely detection of bugs. The company is not a newcomer to its field, but in 2020 it again attracted the attention of investors after it restructured its products. This has borne fruit: the growth rate of annual revenue is kept close to 20%.

In addition, a new payment model has been introduced: customers pay based on the actual capacity of the platform. New Relic is also experimenting with providing limited functionality within the free trial period. This allows you to attract small firms that can grow over time and increase the amount of resources used. Now the number of clients working under this model is ~12,000 (+39% YoY), while another 4,000 New Relic users should eventually join their ranks by switching from their current payment plans. Management is going to make the necessary efforts so that the main stage of migration is completed in the next 4-6 quarters. Thus, there is a very real source for increasing the amount of income in the foreseeable future.

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09 June 2023

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