Hubspot stock has formed an alarming pattern despite solid fundamentals

Hubspot stock price has been in a strong downward trend since February last year, shedding billions of dollars in value as its market capitalization dropped from over $40 billion to $12 billion today. This retreat may continue as the stock has formed a large inverted cup-and-handle pattern.

Hubspot stock price has formed a large bearish chart pattern

The weekly timeframe chart shows that the HUBS stock has crashed in the past few months, moving from a high of $880 in February last year to the current $227.

It formed a death cross pattern on December 22 as the 50-week and 200-week Exponential Moving Averages (EMA) crossed each other. This pattern is one of the most common bearish signs in technical analysis m

The stock has moved below the Ultimate Support of the Murrey Math Lines tool at $250. Also, the Percentage Price Oscillator (PPO) and the Relative Strength Index (RSI) have continued falling, with the latter sitting near the oversold level.

Most importantly, the stock has formed an inverted cup-and-handle pattern, a common bearish continuation sign. It is now nearing the handle section.

Therefore, the stock will likely continue falling in the near term, potentially to the next key target level at $150. On the flip side, a move above the resistance level at $300 will invalidate the bearish outlook and point to more gains.

HUBS stock chart | Source: TradingView 

Hubspot’s business is growing but facing headwinds 

The bearish HUBS stock price crash is happening as investors remain concerned that artificial intelligence technology will replace some of its businesses, especially in the marketing, content creation, and sales.

The most recent results showed that its business is still growing, with the management expecting that AI will help improve its business.

Its numbers showed that its revenue rose by 20% YoY to $847 million, with most of it being in the subscription section. The gross margin rose by 18% to $722 million, while its operating profit jumped by 44% to $191 million.

Hubspot’s annual revenue jumped by 19% to $3.13 billion, while the operating profit soared by 26% to $582 million. Analysts believe that the company’s business has more room to grow despite the substantial challenges.

For example, the average estimate among investors is that its first quarter revenue will be between $862 million and $863 million, up by 21%. Its annual revenue will be about $3.7 billion, up by 18% YoY. 

The company has also become a bargain, with the forward price-to-earnings ratio falling to 19.5, lower than the sector median of 21. Also, the forward PEG ratio has moved to 0.65, which is also lower than the sector median of 1.32.

The company is still attracting new customers, a sign that customers are still interested in its business. It ended the last quarter with 288,706 customers, up by 16% YoY.

At the same time, the company has started buying back its shares, a move that will reduce its outstanding shares and boost its earnings-per-share (EPS). It will buy back shares worth $1 billion this year, a notable amount for a company with a market capitalization of about $12 billion.

Therefore, it is clear that the company’s technicals and fundamentals have collided. In this case, the stock will likely continue falling and then it will bounce back over time as investors buy the dip.