Choose HubSpot Over Salesforce for Strong Results and Wide Moat

In the area of customer relationship management (CRM) software, the name Salesforce (NYSE:CRM) typically comes to mind. However, there’s another player in this lucrative space that’s worth considering. HubSpot (NYSE:HUBS) offers CRM solutions and more, and investors shouldn’t overlook the value proposition of HubSpot stock.

Hubspot (HUBS) logo displayed on a mobile phone
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In fact, HubSpot’s full suite of tools for service, marketing and sales should impress any CRM aficionado. Besides, the company’s recently issued quarterly data suggest a software up-and-comer in serious growth mode.

With a deeper dive into the data, you might find that HubSpot is much more than a CRM-niche also-ran. Moreover, it would be a shame for investors to miss out on the upcoming gains as HubSpot stock’s trajectory is clearly to the upside.

A Closer Look at HubSpot Stock

First, it should be conceded that HubSpot stock currently offers no dividend payout. Furthermore, the stock is trading much closer to its 52-week high of $268.43 than its 52-week low of $90.83.

Therefore, bargain seekers and dividend-focused investors might not appreciate what HubSpot stock has to offer. On the other hand, momentum-oriented traders should be interested in the stock as the bulls are firmly in control of the price action.

Indeed, HubSpot share have doubled in price since they bottomed out in March. This lends credence to the argument that HubSpot is thriving even as other businesses are struggling amid the novel-coronavirus crisis.

Smaller Can Be Better

Having an “economic moat,” to borrow a term from Warren Buffett, is essential for all businesses. Companies need to have something that differentiates them from their competitors and thereby protects them from loss of market share.

As noted earlier, HubSpot’s primary competition in the CRM software space comes from Salesforce. To be entirely honest, Salesforce is a force to be reckoned with. It’s the well-established leader in providing CRM solutions for large businesses.

But while Salesforce is busy targeting big banks and Fortune 500 companies, HubSpot has found a comfortable niche with small and medium-sized businesses.

The company seems to understand what might appeal to cash-strapped companies during a global pandemic. For instance, right there on the company’s landing page, HubSpot offers a free version of its CRM tool suite.

Moreover, HubSpot encourages its clients to build a community. That’s a savvy way to appeal to growing businesses during these challenging times. Thus, HubSpot currently hosts 150+ user groups as well as 248,000+ certified professionals in its educational segment known as HubSpot Academy.

And so, you might not find massive mega-corporations among HubSpot’s clientele. However, you will find 78,700 customers and, just as importantly, a sense that HubSpot will guide each and every one of them through the CRM-related challenges they’re facing.

Stellar Results

If you’re looking for a company with expansion potential, you’ll be hard-pressed to find one that beats HubSpot. I’ll let the numbers do the talking as HubSpot’s second-quarter results were outstanding:

  • Customer base up 34% year-over-year (YoY)
  • Subscription revenues (which accounted for 96.5% of the company’s total quarterly revenues) up 26% YoY
  • International revenues (which comprise 42% of HubSpot’s total quarterly revenues) up 32% YoY
  • Non-GAAP earnings up 9.7% YoY and beat the analyst consensus estimate by 41.7%
  • Revenues up 25% YoY and outperformed analyst projections by 4.2%

Meanwhile, how has HubSpot’s more famous competitor been doing in 2020? Information relayed by InvestorPlace contributor Larry Ramer appears to suggest that some fiscal contraction might be in progress:

“Salesforce’s operating income actually fell to $463 million in its last fiscal year from $535 million a year earlier. Further, in February, it predicted that its revenue growth this year would fall to 23% versus last year’s 29%.”

The Bottom Line

This is not to suggest that Salesforce is a bad company. I’m not opposed to buying that company’s stock.

However, there could be a better value proposition as well as a more compelling growth story with HubSpot stock. The company’s quarterly results are inarguable, and targeting small businesses is a smart way for HubSpot to establish and maintain an enduring economic moat.

As of this writing, David Moadel did not hold a position in any of the aforementioned securities.

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