Buying a company that has recently gone public can be exciting since you are adding shares of a stock that is instantly in price discovery mode. The market will dictate just how valuable the shares of that business are over time based on supply and demand, and you have an opportunity to potentially profit on what could be a game-changing company. If you are confident in the company's growth prospects, business model, and management team, an investment in an IPO stock can lead to astounding gains over the long term, particularly if you get in before the market realizes how valuable the shares truly are.
With that said, for every successful IPO
stock there are dozens of others that never live up to the initial hype and leave early investors underwater. That’s why it's so critical to do your homework ahead of investing in a newly public company and understand the risks that are involved with getting into a stock without a trading history. With the hot IPO market showing no signs of slowing down, there are plenty of new companies to choose from if you are interested in adding exposure to innovative new companies with the potential to really take off.
Here are two new IPOs that stand out as stocks with explosive potential going forward: Doximity (NYSE:DOCS)
First up is Doximity, a newly public company that combines the health care industry with social media. Often referred to as the “LinkedIn for Doctors”, Doximity’s cloud-based platform helps medical professionals to network and provides tools that help them collaborate with colleagues, coordinate patient care, conduct virtual patient visits, stay up-to-date with medical news, and manage their careers. The platform is free to doctors, and more than 80% of U.S. physicians are members, which tells us that there is certainly a market for Doximity’s platform.
Doximity generates revenue from the health care systems and pharmaceutical manufacturers that it offers its commercial solutions. With so many medical professionals on the platform, it makes sense that major players in the health care and pharmaceutical industry would want to educate physicians about their offerings with Doximity. The company also has a telehealth
business, which had 63 million visits delivered in the company’s fiscal year 2021.
What’s really interesting here is that the company has been profitable in each of the last three years, a rare occurrence for high-growth software companies. Doximity reported $206.9 million in revenue during FY 2021, up 78% year-over-year, and reported net income of $50.2 million, up 69% year-over-year. It’s clear that this is a company with explosive potential given its disruptive business model and potential to improve the healthcare industry, which means that investors should keep an eye on the stock going forward. SentinelOne (NYSE:S)
Cybersecurity is an area of the market that is rife with opportunities, which is a big reason why SentinelOne is a new IPO that should be on your radar. The company has developed an artificial intelligence extended detection and response platform that enables autonomous cybersecurity defense. What’s intriguing about SentinelOne is that, unlike direct competitor CrowdStrike
, the company’s platform relies on AI, not human analyst intervention, to act on malicious activity in real-time. This allows SentinelOne to detect threats in real-time with the fastest recovery on the planet.
With the way that cyberattacks are increasing and the fact that cybercrime is expected to cost the world approximately $10.5 trillion annually by the year 2025, it’s easy to recognize the potential for a company like SentinelOne. Keep in mind that many enterprises are in the midst of their digital transformations, which means that the addressable market for SentinelOne is increasing at a torrid pace.
The company is experiencing attractive top-line growth at this time, as revenue for FY 2021 grew by 100% year-over-year to reach $93.1 million. SentinelOne is still unprofitable, but the fact that it serves 37 companies in the Fortune 500 and grew its total customers from 2,700 to 4,700 year-over-year tells us that SentinelOne certainly has some momentum working in its favor. Just keep in mind that the company’s valuation is a little hard to justify at this time, which means it might make the most sense to wait a bit before adding shares.
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