Google parent Alphabet Inc (NASDAQ:GOOG) has abandoned its attempt to acquire HubSpot Inc, a move that would have marked one of the largest tech takeovers of the year, Bloomberg reported.
HubSpot's shares dropped by as much as 19% on Wednesday, bringing the company's market value to around $25 billion.
Despite Alphabet's initial interest earlier this year, detailed discussions never materialized. The acquisition would have helped Alphabet compete with companies like Microsoft, Oracle, and Salesforce in the small to midsize enterprise market but would likely have faced scrutiny from US antitrust regulators.
Jefferies analysts view this reaction as a combination of disappointment over the failed deal and concerns about HubSpot's fundamentals heading into the second quarter.
"We are not surprised by the negative reaction, but see the magnitude as overdone," the Jefferies analysts wrote.
Jefferies expects investor focus to shift back to HubSpot's fundamental prospects.
"For the stock to work from here, we believe HUBS needs to deliver at least 20% constant currency subscription revenue growth and at least 100bps of operating margin expansion in 2024," the analysts woite.
Jefferies sees the current valuation as attractive for long-term investors, noting that HubSpot is trading below its historical averages and close to parity with the IGV index, versus its typical premium.