HubSpot's Pullback Is Surprising, But These Analysts Are Buying In

• Shares of HubSpot, Inc. (NYSE: HUBS) have jumped 37.63 percent year to date.

• Morgan Stanley's Stan Zlotsky has upgraded the rating on the company from Equal-weight to Overweight, while raising the price target from $55 to $57.

• Following five quarters of acceleration in growth, Zlotsky views the recent pullback in the stock as an attractive entry point for investors.

According to the Morgan Stanley report, "HubSpot is emerging as aleader in marketing automation software with asizeableTAM and numerous growth avenues."

Stan Zlotsky believes that that the company has "competitive differentiation" in what is estimated to be $30 billion addressable market due to its "inbound approach" to marketing, its "natively integrated" platform and its focus on the mid-market.

Zlotsky also believes that HubSpot has been executing well on its growth strategy, with a rapid increase in customer acquisition in Q2, representing 36 percent year on year growth, increased billings per customer, growth of which is estimated at 33 percent in 1H15, and the over 90 percent dollar retention rate being sustained in Q2.

The management expressed confidence in being able to sustain the high dollar retention rate for the remainder of the year. The company achieved positive operational cash flow in Q2, nearly a year ahead of target. "We believe management's confidence in sustainability of these positive levels going forward and reaching FCF breakeven in early CY17 should bolster investor optimism," Zlotsky added.

At its recent annual Inbound user conference, HubSPot introduced two new paid products, Ads and Reporting, which Zlotsky believes would become "important new pricing vectors for HubSpot's sales force."