Kerrisdale Issues HubSpot Short Report, Calling Out Flawed, Expensive Products

By Sam Boughedda — In a short report issued Wednesday morning, investment research firm Kerrisdale Capital told investors that software developer HubSpot Inc ‘s (NYSE:) products are “flawed” and the “pricing is expensive.”

New York-based Kerrisdale pointed to HubSpot’s lack of profitability, fierce competition, and “stale products” as reasons it believes the company’s shares will soon fall.

Starting a series of Tweets outlining its reasons, Kerrsdale stated: “We’re short $HUBS. Report at Trading at 20x fwd rev, $HUBS benefited from a one-time COVID boost that lifted shares 6x. But fierce competition & stale products will lead to low growth / margins, long before the biz grows into its sky-high valuation.”

After closing Tuesday’s session at $680.20, HubSpot shares initially fell to a low of $654.53 following the report. Shares have since erased the majority of those losses and now trade around the $681 mark, marginally up for the day.

The company and its share price have soared since the start of the pandemic, climbing just under 70% in 2021 alone. In March 2020 its shares were priced at around $100. However, Kerrisdale said, “the COVID tailwind will fade and future growth will depend on expansion into already crowded markets.”

“Though HubSpot does have some devoted fans, its core technology – a database that can be used to create customized emails and web pages – is nothing special,” they added.

Kerrisdale’s views are in direct contrast to Goldman Sachs who initiated the company with a Buy rating earlier this month. Goldman analyst Gabriela Borges set a $953 price target on the stock, which at the time implied a 32% upside. In addition, in her research note, Borges said that HubSpot’s strategy and execution will drive further upside over the next 5 years after it proved its ability to expand beyond its marketing hub.

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