eyeQ: share crash could be buying opportunity
Experts at eyeQ use AI and their own smart machine to analyse macro conditions and generate actionable trading signals. Here’s a multibillion-dollar stock on its radar.
11th July 2024 14:25
by Huw Roberts from eyeQ
"Our signals are crafted through macro-valuation, trend analysis, and meticulous back-testing. This combination ensures a comprehensive evaluation of an asset's value, market conditions, and historical performance." eyeQ
- Discover: eyeQ analysis explained | eyeQ: our smart machine in action | Glossary
HubSpot
Trading signal: long-term strategic model
Macro Relevance: 64%
Model Value: $591.75
Fair Value Gap: -20.2% discount to model value
Data correct as at 11 July 2024. Please click glossary for explanation of terms.
It would have been Google-owner Alphabet Inc Class A (NASDAQ:GOOGL)’s largest-ever acquisition and its first multibillion-dollar deal since 2022.
Acquiring HubSpot Inc (NYSE:HUBS) would have allowed Google to compete with other players in the customer relationship management (CRM) space such as Salesforce Inc (NYSE:CRM), Oracle Corp (NYSE:ORCL) and Microsoft Corp (NASDAQ:MSFT). However, the acquisition fell through, as reports came out on Wednesday that Alphabet isn’t going forward with plans to buy the software company.
As a result, HubSpot’s stock price plummeted by 12%, which leaves it around 20% cheap on eyeQ’s model where there are two standouts: although it’s cheap, there’s no official signal until our macro relevance gets back over 65% - our threshold for when a stock is predominantly being driven by big picture stuff such as growth and inflation. Model confidence is up by 21% in the last two weeks and now sits at 64%, so we’re close.
Economic growth is the dominant driver of fair value. It accounts for around a third of model explanatory power. Weak economic data dragged fair value lower in June but, more recently, there have been signs that the overall macro environment is stabilising.
So, no signal yet. And, if you believe in an impending recession, you’d probably overrule any signal if and when it does come. But for investors who feel the growth picture can remain healthy, this merger disappointment could provide a good entry level.
Source: eyeQ. Past performance is not a guide to future performance.
Useful terminology:
Model value
Where our smart machine calculates that any stock market index, single stock or exchange-traded fund (ETF) should be priced (the fair value) given the overall macroeconomic environment.
Model (macro) relevance
How confident we are in the model value. The higher the number the better! Above 65% means the macro environment is critical, so any valuation signals carry strong weight. Below 65%, we deem that something other than macro is driving the price.
Fair Value Gap (FVG)
The difference between our model value (fair value) and where the price currently is. A positive Fair Value Gap means the security is above the model value, which we refer to as “rich”. A negative FVG means that it's cheap. The bigger the FVG, the bigger the dislocation and therefore a better entry level for trades.
Long Term model
This model looks at share prices over the last 12 months, captures the company’s relationship with growth, inflation, currency shifts, central bank policy etc and calculates our key results - model value, model relevance, Fair Value Gap.
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