Investing.com -- Bernstein has begun research coverage on HubSpot (NYSE:HUBS) stock on Wednesday, assigning it a Market Perform rating and a price target of $693, which implies roughly 14.5% upside potential from current levels. 

The firm’s analysts expect HubSpot to continue its upward trajectory, projecting its revenue growth to surpass Wall Street expectations. They see the company as "well-positioned to continue gaining market share.”

Bernstein forecasts a compound annual growth rate (CAGR) of approximately 17% in revenue and an annual operating margin improvement of about 2 percentage points from calendar year 2024 to 2027.

In the longer term, as the Customer Relationship Management (CRM) market matures and HubSpot's revenue base expands, the focus is expected to shift towards profitability. Bernstein believes that HubSpot is capable of delivering on this front.

“Overall, we are optimistic about HubSpot's fundamental story,” analysts led by Firoz Valliji said in a note.

However, they also note that HubSpot's current valuation is at the higher end of its historical range and carries a premium compared to its software peers.

This high valuation is attributed to HubSpot being viewed as a potential beneficiary of an SMB upswing and a shift in investor preference towards low-capital expenditure software vendors.

“As such, we think upside potential is capped,” analysts noted.

On the AI front, Bernstein sees the company as a potential beneficiary due to its platform product, system of record, and an SMB customer base that could appreciate AI-driven automation.

“However, we are not baking in significant AI upside in our expectations as we think the debate on net impact of AI (monetization vs. seat count shrinkage) is not settled yet,” the analysts added.

HubSpot, a cloud-based sales and marketing platform for SMB B2B customers, has successfully expanded its product portfolio, grown its customer base, and increased sales to existing clients, driving strong market share gains in recent years.

The stock is widely favored on Wall Street, with 32 buy ratings, 7 neutral ratings, and no sell recommendations.

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