Seven reasons why $HUBS will trade down to $50 in this rotation, fundamental value at $25/share.

1. No Pricing Power: HubSpot has reduced the price of its key product offering to $0. Going freemium because they can’t keep up with customer churn. Note: this is not $SHOP who although we have issues with their marketing practices, was able to increase pricing on customers

2. Transparency no more: For a company who has boasted about transparency in corporate communication, they have now gone dark on Wall Street and industry consultants. See addendum for KPI elimination and Gartner.

3. Partner decline: Major deceleration in agencies/business partners, the lifeline of HUBS business.

4. Growth hitting a wall: US biz growth level in serious decline- even attendance at their Inbound Conference suffered greatly (from 35% to 10% growth). If you can’t make money in a country with 300 million people and one language- good luck in Europe

5. Corporate defections-Bad Business or Funky Business? : High-level corporate defections cannot be ignored. Former top executives starting related businesses – In the HubSpot Offices without disclosures.

6. Broken business model? Selling campaign based ad software to SMB has and will never be a scalable model. Worse HubSpot’s pivots into CRM is moving into a wasp’s nest of competition with an inferior product.

7. No IP: Lack of any real intellectual property or patents.

Just yesterday, Cowen, in their CMO tech survey commented about the downfalls of HubSpot business by stating the “revenue economics of its model are not as attractive as some of its enterprise peers” and worse Hubspot screened the lowest when it came to “net spending intentions”.

The days using a top 10 lists to game Google are in decline. Look at Buzzfeed, the king of the “lists” has just laid off 20% of its staff. Ad spend is in a massive shift to video and inbound marketing has shifted to account based marketing as the duopoly of Google and Facebook have increased targeting.

$HUBS has hit the wall

At BEST this can be valued at Constant Contact (perfect comparable see addendum) whose takeout price would put HUBS valuation at $27 Hubs Switches to FREEMIUM Model (Nov 2016)

Despite claiming transparency left and right, they have eliminated relevant KPIs that would allow Wall Street to understand churn.

This is not transparency

They have even gone dark and stopped being transparent with Gartner, the industry thought leader- Note Hubspot has stopped sending Gartner information as they got demoted.

Major deceleration in agencies/business partners.

US biz growth level in serious decline- even attendance at their Inbound Conference suffered greatly (from 35% to 10% growth)

High level corporate defections cannot be ignored, especially if there might be some funky business going on. Earlier in 2017 Peter Caputa, a key executive in charge of the partner network left HubSpot to run a company called Databox that

IS BASED IN THE OFFICES OF HUBSPOT. All without proper disclosure.

Why are formers willing and allowed to start business that poach HubSpot clients. Is this bad business or funky business?

HubSpot also seems to be losing many of its key employees to another related company called Drift, started by former head of products of HubSpot.

HUBSPOT Defections to Drift

HubSpot’s pivot into CRM products is beyond highly competitive and has yet to be proven. They could not make money in Inbound Marketing…welcome to the competitive landscape of marketing technology.

At best, HubSpot is worth SaaS Comps. We give it the benefit of the doubt and give it take-out valuations. Even though we do not consider HUBS SaaS and they are not being taken out- we cannot get valuation higher than $57

Hubspot is more in line with a content marketing company whose takeout valuations are 2x revenue.

The most honest comparable is Constant Contact, in both revenue growth and business model. With that in mind, HUBS should not trade above $30 per share.

Cautious Investing to All.