Shares of HubSpot, Inc. (HUBS Quick QuoteHUBS - Free Report) have jumped 71.4% over the past year, driven by improved market demand across its portfolio on the back of a flexible business model and solid cash flow. Earnings estimates for the current and next fiscal year have increased 87.5% and 57.8%, respectively, since October 2022, implying robust inherent growth potential. With healthy fundamentals, this Zacks Rank #2 (Buy) stock appears to be a solid investment option at the moment. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Growth Drivers

Headquartered in Cambridge, MA, HubSpot provides inbound marketing and sales applications over the cloud. The software-as-a-service (SaaS) vendor helps businesses attract more customers through search engine optimization (SEO), social media, blogging, website content management, marketing automation, email, Customer Relationship Management (CRM), analytics and reporting.

HubSpot’s inbound marketing and sales applications enable businesses to easily reach, acquire and retain customers through traditional marketing tools like cold calls, print advertisements and email. The company’s strategic priority is to deliver a world-class front-office platform by investing in anchor hubs and innovating new emerging hubs. The growing adoption of inbound applications has helped develop the marketing agency partner network. Management’s focus on integrating generative AI (artificial intelligence) to drive innovation and add more value to customers is likely to reap long-term benefits.

HubSpot also remains focused on becoming a leading CRM platform provider in the near future. The core of HubSpot’s subscription-based cloud platform is its inbound database that captures user activity throughout the customer’s lifecycle. Subscribers of HubSpot’s SaaS applications use multiple channels like optimized search engine techniques, social media and targeted content through websites and blogs to fulfill customer needs. The platform's success is evident from the rapid growth in marketing customers.

The company has significant scope in cross-selling its products to the existing customer base. The One HubSpot initiative is a key growth driver. In addition, HubSpot's App Marketplace offers a customer-centric solution by making it simple for companies to find and seamlessly connect the integrations to grow their businesses. As companies prioritize a digital-first approach, it is likely to create more opportunities for developers to build new integrations that support every stage of the customer journey.

HubSpot has rolled out multiple updates to its Sales Hub product, including a low-priced Starter tier and improvement to its sales engagement tools to make them more affordable for growing sales teams. Moreover, the company has a sizeable customer base that uses its products for free. Given the growing effectiveness of its inbound applications and innovative product portfolio, we believe that many of these free customers will eventually choose to buy HubSpot pro products for both their marketing and sales functions. This presents a significant top-line growth opportunity for the company and will likely boost its margins.

It has a long-term earnings growth expectation of 31.2% and delivered an earnings surprise of 37.2%, on average, in the trailing four quarters.

Other Key Picks

Arista Networks, Inc. (ANET Quick QuoteANET - Free Report) , carrying a Zacks Rank #2, is likely to benefit from strong momentum and diversification across its top verticals and product lines. The company has a software-driven, data-centric approach to help customers build their cloud architecture and enhance their cloud experience. Arista has a long-term earnings growth expectation of 18.7% and delivered an earnings surprise of 12.8%, on average, in the trailing four quarters.

It holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed datacenter segment. Arista is increasingly gaining market traction in 200- and 400-gig high-performance switching products and remains well-positioned for healthy growth in data-driven cloud networking business with proactive platforms and predictive operations.

Ubiquiti Inc. (UI Quick QuoteUI - Free Report) , carrying a Zacks Rank #2, is another key pick in the broader industry. Headquartered in New York, it offers a comprehensive portfolio of networking products and solutions for service providers and enterprises at disruptive prices.

Ubiquiti boasts a proprietary network communication platform that is well-equipped to meet end-market customer needs. In addition, it is committed to reducing operational costs by using a self-sustaining mechanism for rapid product support and dissemination of information by leveraging the strength of the Ubiquiti Community.

Motorola Solutions, Inc. (MSI Quick QuoteMSI - Free Report) , carrying a Zacks Rank #2, delivered an earnings surprise of 5.62%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 5.58%.

Motorola provides services and solutions to government segments and public safety programs, along with large enterprises and wireless infrastructure service providers. It develops and services analog and digital two-way radio, voice and data communications products and systems for private networks, wireless broadband systems and end-to-end enterprise mobility solutions to a wide range of enterprise markets.