HubSpot Connects the Dots at Investor Day; Previews Flat Margins for 2023; FVE Cut to $395

While HubSpot’s investor day was upbeat, with a variety of new product introductions and market expansion, the muted margin preview for 2023 was the most immediately impactful item. We were modelling margin expansion beyond the approximately 100 to 150 basis points baked into the consensus view. Based on management’s preview, which includes no change to its long-term target of 20% to 25% non-GAAP operating margins, we have slowed the pace of margin improvement throughout our 10-year discrete DCF forecast without materially changing our long-term assumption and are thus lowering our fair value estimate to $395 per share, from $510. Our growth estimates are unchanged. Along with most of our software universe, we see shares as attractive.