It’s been a relatively quiet week for IPOs, but as summer transitions into fall, look for that to change.
According to IPO tracker Renaissance Capital, as many as 15 companies may join the public markets in the coming week. These include eyeglass retailer Warby Parker, tech consulting firm Thoughtworks, coffee chain Dutch Bros., Swiss-based sports-betting platform Sportradar Group and identity security manager ForgeRock.
Why do investors get excited about IPOs, particularly those of highly touted deals, or perhaps familiar names?
It’s easy to see the appeal of getting into a potential big winner early. Despite a more democratized process for IPO investing, including direct listings, it’s not necessary or even desirable to jump into a stock the day it goes public.
I like to use the example of Facebook, which was highly touted prior to its May 2012 IPO. After going public at $38, shares rallied to $45, then quickly reversed lower. The stock went into a correction that lasted until September 2013, at which point it took off and never looked back.
At the time, the popular narrative painted Facebook’s IPO as a failure.
Today, it’s the fourth most heavily weighted stock in the S&P 500, with a market capitalization of $1.0594 trillion.
Of course, it’s not likely that any given IPO will become the next Facebook. But the Facebook example shows you the value of waiting out a stock’s initial post-IPO base before making an investment.
Stevanato Group NYSE: STVN is an Italian company that offers drug containment, drug delivery and diagnostic services.
The stock went public in July at $21. It’s now trading between $26 and $27 and has been on a strong upward trajectory. It pulled back to a low of $17.70 on August 17, but quickly rebounded, meaning there’s been no actual post-IPO base yet.
Fundamentally, the company looks solid. Profitability more than doubled in 2020 over 2019, and grew at double- or triple-digit rates in each of the past five quarters. Revenue grew at double-digit rates during that time.
According to data compiled by MarketBeat, the consensus rating on Stevanato is a “buy,” with a 3.21% downside.
At this juncture, it’s best to keep watching this mid-cap. Analysts expect full-year earnings per share to come in at $0.55, up 68%. There’s promise ahead but it’s not advisable to purchase an extended stock. If the analysts are correct, the stock may soon turn lower, which could offer an entry point.
Snap One Holdings NASDAQ: SNPO made its public debut on July 28, priced at $18. Mid-session Wednesday the stock was trading between $22 and $23.
The company offers smart solutions for connectivity at homes and businesses.
This is another stock that hasn’t yet formed a proper base. It’s currently holding 4.9% above its 10-day moving average, and 13% above its 21-day.
It pulled back to tag its 10-day line in late August and early September, before rallying higher.
Snap One is emblematic of what makes new IPOs attractive. The company is in a business that has plenty of room to grow as more buildings adopt smart solutions.
As is common with a promising new stock, there’s plenty of optimism, as shown by the short percent of float at just 0.34%, according to MarketBeat data.
Telus International NYSE: TIXT is a mid-cap hailing from the tech sector. The stock went public on February 3, priced at $25. It rallied to an opening-day high of $33.60 and didn’t regain that level again until August 25.
However, the stock did clear a cup-with-handle pattern on July 7, above a $32.44 buy point.
The stock, like many younger and smaller companies, tends to exhibit some wide intraday price swings, but it’s shown excellent support along its 10-day line recently.
Telus provides customer experience and digital business services for customers around the world. Its technologies include artificial intelligence, bots, mobility solutions, and cloud contact centers.
Institutions own 9.63% of shares, according to MarketBeat.
While that’s lower than you’ll find in larger companies, it’s not uncommon for newly public mid-caps and small caps without much analyst coverage to go unloved by institutional investors, at least for a while.
On the plus side, the number of mutual funds holding shares grew from 160 to 182 in the most recent quarter.
The current pullback to the 10-day line may offer a chance to stake out a position in this stock ahead of its next earnings report in October.
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