Analysts weigh in on HubSpot after Google takeover chatter
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Government pursuing technology antitrust cases
The number of challenges is the highest since the U.S. began requiring pre-merger antitrust review in 1976.
FTC Chair Lina Khan and Justice Department antitrust chief Jonathan Kanter had both promised more aggressive antitrust enforcement when they took office in 2021.
Related: Analyst revamps Google parent Alphabet’s stock price target after suit settled
Last month, the FTC sued to block a proposed merger between grocery giants Kroger (KR) and Albertsons (ACI) , charging the $24.6 billion deal would eliminate competition and lead to higher prices for millions of Americans.
Meanwhile, the Justice Department filed an antitrust lawsuit against Apple (AAPL) last month, alleging that the tech giant has built a “smartphone monopoly” at the expense of consumers, developers and competitors.
And the Justice Department and a coalition of state attorneys general filed a lawsuit against Alphabet last year, alleging that Google unlawfully abused its dominance in the search engine market to maintain monopoly power.
In February, HubSpot reported fourth-quarter earnings of $1.76 per share, up from $1.11 a year ago, beating FactSet’s consensus for $1.54 per share.
Revenue totaled $582 million, up from $470 million, above FactSet’s call for $558.5 million.
“We saw a solid finish to a good year despite the challenging macro environment,” CEO Yamini Rangan told analysts during the company’s earnings call. “Our customers have high confidence in our ability to help them grow, and we are becoming the clear platform of choice for scaling companies.”
Several analysts responded to the news of the possible Alphabet acquisition.
KeyBanc analyst Jackson Ader said that regulators are clearly taking a more aggressive stance against mega-cap tech companies consolidating through acquisition.
However, the firm believes that HubSpot’s pure software model is differentiated enough from Google’s core business to make the regulatory scrutiny less onerous than, for example, the Adobe (ADBE) and Figma planned acquisition.
Analyst sees merits in HubSpot merger
In December, Adobe halted its proposed $20 billion takeover of the privately held design startup following opposition from regulators in Europe and the U.K.
KeyBanc said that many recent consolidation efforts have been centered around quasi-M&A in a partnership-type relationship, giving AI startups access to cloud platforms without merging companies. Still, this report sounds more like a straight-down-the-middle acquisition.
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The firm has an underweight rating on HubSpot with a price target of $520 on the shares.
In a research note, Stifel told investors that the firm sees the merits of combining this CRM suite with Google’s existing productivity suite and advertising tools. This combination would deepen platform capabilities on both the front and back end of “customer journeys.”
The firm said Alphabet and HubSpot’s merger could present an alternative to the market but at a level below the full-scale enterprise market that Microsoft (MSFT) and Salesforce (CRM) play in today.
Evercore ISI told investors in a research note that while a reported combination makes sense at a 30,000-foot level, completing this deal would involve many hurdles.
The firm’s analysts wondered why Google wouldn’t first spin-off Google Cloud Platform and then buy HubSpot to create a standalone software business that doesn’t have to deal with the regulatory issues that overhang Google’s consumer businesses,
And while Evercore said that it “gets” the broader rationale, the firm finds it “odd” that HubSpot would be willing to see their business subsumed into an acquirer where it would be essentially lost in a sea of businesses.
Evercore ISI did not change its In Line rating or $560 price target on HubSpot.
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