What happened
HubSpot (HUBS 3.79%) shares lost 13.9% of their value today, as a global stock market sell-off more than offset tailwinds associated with the company's solid financial performance in 2019.
So what
HubSpot is a software-as-a-service technology company that offers tools that small and midsize companies use to improve their marketing, sales, and customer service. Although the business is growing rapidly, a 6.95% sell-off in the Invesco NASDAQ 100 ETF (QQQ 0.01%) created a stiff headwind today that bullish investors couldn't overcome.
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On Feb. 12, management reported that fourth-quarter revenue improved 29% to $186.2 million, bringing full year sales to $674.9 million, up 32% compared with 2018. The revenue growth resulted in non-GAAP net income of $20.9 million in Q4, up from $15.8 million one year ago, and full year non-GAAP net income of $69.8 million, up from $36.9 million in 2018.
The company also issued guidance for total revenue in the range of $840.5 million to $844.5 million in 2020, and non-GAAP net income of $1.24 to $1.32. The earnings outlook was a bit light to expectations because of a ramp up in hiring that the company expects will reduce margin by about 3% year over year in the first half of 2020.
Now what
Management continues to invest back into the company to drive market share and client retention. Investments like that could mean that the company's profit is hamstrung in the short term, but the move could pay off in the form of greater profitability over time. The company's client count increased 30% in the past year and average subscription revenue is holding steady. If the company can generate more revenue per customer by leveraging its higher retention rate via cross-selling, buying shares on sale could pay off.
