Google, Hubspot Deal Talk Reminds Wall Street Why It Loves the Stock

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Wall Street is keeping a close eye on HubSpot, the $34 billion maker of cloud software for customer relationship management and marketing, especially after Reuters reported Thursday that Google parent Alphabet discussed making an offer to acquire it.

A deal like this would allow Google to better compete with Salesforce in customer relationship management software, and it makes sense strategically as Google looks to grow its share in the cloud market.

Still, Wall Street analysts say it’s unlikely to happen at this time, especially as US antitrust regulators increasingly scrutinize Big Tech and as HubSpot grows on its own. Deal or no deal, all the talk has made one thing clear: Wall Street is kind of obsessed with HubSpot. The company’s stock rose by over 10% the day the news of the discussions broke.

HubSpot has several advantages compared to its biggest rival Salesforce. HubSpot has a stronghold in small and medium-sized businesses, a weak spot for Salesforce. It also offers affordable, accessible products that fare better in weak economic times.

After Salesforce raised its prices last year, many customers considered switching to HubSpot, Business Insider previously reported. HubSpot generated $2.17 billion in revenue in 2023, up 25% from 2022.

“With Salesforce, you need a Salesforce administrator,” said Rishi Jaluria, managing director of software equity research at RBC Capital Markets. “Different products are not as well integrated as they are with HubSpot, where they’re all organically built on the same platform.”

“We are seeing more situations where HubSpot is actually being competitive with Salesforce,” he added.

Analysts are confident in the company’s AI technology, which it plans to incorporate into its product offerings.

“We see plenty of growth runway ahead for HubSpot,” William Blair tech equity research cohead Arjun Bhatia wrote in a research note after viewing the company’s AI product road map in September. “Given the company’s track record of consistent execution and product innovation, we believe it is well-positioned to capture additional share.”

While a deal likely won’t hold up to regulatory scrutiny, “the mere mention of interest” by Google in acquiring HubSpot, “should remind investors of the reasons we have been and continue to be, long-term buyers of this high-quality, best-in-class asset,” Fred Havemeyer, head of US AI and software research at Macquarie wrote in a note.

If Google does make an offer to acquire HubSpot, it will be up to HubSpot whether to accept — and it may not accept, Havemeyer wrote in the note.

He said the company “has never made mention of a desire to sell and has quite capably run itself during the most challenging years” for small and medium-sized businesses. He added that HubSpot provided shareholders with a return of 58% last year.

Google and HubSpot already have some synergies. The two companies partnered on a suite of HubSpot applications for Workspace, Google’s suite of office applications. HubSpot has also disclosed that it is a Google Workspace customer and uses Google Cloud as its international cloud.

Got a tip? Contact this reporter at ethomas@businessinsider.com or on the encrypted messaging appt Signal at +1-929-524-6964.

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