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Why HubSpot Stock Jumped 16% This Week

By Demitri Kalogeropoulos – Updated Oct 15, 2021 at 8:28AM

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The software specialist is entering a new market.

What happened

HubSpot (HUBS -8.09%) shareholders beat a rising market this week as shares jumped 16% through trading on Thursday compared to a 1.8% increase in the S&P 500.

The rally was sparked by news that the enterprise software specialist is launching a new service aimed at helping businesses process payments from other enterprises.

A person an an office uses a headset.

Image source: Getty Images.

So what

The payments solution was announced at HubSpot's annual investor conference on Oct. 12 and immediately got investors' attention. The software-as-a-service specialist could convince as many as one-third of its existing customers to quickly adopt the functionality.

It might help HubSpot win new clients, too, even as it extends its average contract value over time.

Now what

In an investor presentation at the conference, executives described the payments initiative as a first step in expanding HubSpot's ability to offer complete customer resource management solutions. It will likely reduce profitability for the wider business to start, management said, while helping support long-term growth and profitability.

To that end, management on Tuesday reiterated its financial targets that see operating profit margin eventually reaching between 20% and 25% of sales compared to the 8% rate that investors have seen so far in 2021.

Several successful product offerings will be needed over the next few years to reach that ambitious goal. This week's payments launch is an important part of that growth strategy.

Demitri Kalogeropoulos 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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