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Why HubSpot Stock Fell 25% in March

By Chris Neiger – Apr 6, 2020 at 2:06PM

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The software-as-a-service company hasn't escaped negative investor sentiment stemming from COVID-19.

What happened

Shares of HubSpot (HUBS -0.68%), the cloud-based customer relationship management company, dropped 25.8% in March, according to data provided by S&P Global Market Intelligence. As businesses of all sizes closed due to COVID-19, investors were concerned that HubSpot's software-as-a-service company would be negatively affected as well. 

So what 

Many stocks have been pummeled over the past few weeks, leaving the S&P 500 down nearly 13% in March. But HubSpot's shares took an even sharper downward turn, likely because of the company's reliance on small- and medium-sized businesses. 

Line chart image with blue and green graphs.

Image source: Getty Images.

In the fourth quarter, reported on Feb. 12, HubSpot's sales increased 29% year over year, and full-year sales for 2019 jumped 32% compared to 2018.But with many companies closing temporarily and laying off workers, HubSpot likely won't experience the strong growth it's seen in recent quarters. The stock market has been anything but predictable over the past few weeks, and some investors appeared worried that the coronavirus crisis will hurt HubSpot's sales. 

Now what

HubSpot's share price slide continued into April, and the company's stock is down about 9% as of this writing. While investors can expect more volatility from HubSpot's share price in the short term, the company's long-term prospects are still evident. 

The company grew its total number of customers by 30% over the past year, its gross margins were 82% in the fourth quarter, and HubSpot's subscription revenue increased by 33% compared to 2018. 

The next few quarters could be tough for HubSpot, and many companies, but its underlying business appears to be sound. That should leave current investors hopeful that HubSpot's long-term prospects could once again bring its share price back up when the market, and the economy, get back on track.

Chris Neiger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends HubSpot. The Motley Fool has a disclosure policy.

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