Blogs -IPO Round Up

IPO Round Up


September 16, 2020

author

Beth Kindig

Lead Tech Analyst

IPO Report card:

As of late, the underlying goal of IPOs appears to be how to get retailers to pay as much as possible until the lock-up expires. It doesn’t matter if Berkshire invests unless you get a chance to buy at the same price. Your shares could lose 50% and Berkshire would break even. That’s not a public offering by any stretch of the word. Please keep in mind, that many winners in tech retrace well below their opening price (up to 50% below opening price in the case of Crowdstrike).

https://images.prismic.io/bethtechnology/bb742ecb-9ecc-4b94-9130-46ff6b0e40b4_IPO-report-card.jpg?auto=compress,format

Prior to Snowflake raising its opening price (for the fourth time), I had cautioned that: “the biggest risk of all is how much alpha will be left in the first year of trading by the time retailers are offered the crumbs.” When I wrote that, I did not imagine we’d see the opening price of $245. It was, in a word, astounding.

Like Warren Buffet says, the best part of investing is you don’t have to hit every ball. On that note, I can confidently say Berkshire would not be hitting the ball at 98X NTM revenue – but they sure hope you do.

Snowflake went public with an IPO price of $120. It opened at a 105% premium of $245, and closed on its first day of trading just under $254. Based on its opening price, this gave the stock a valuation of 98x NTM revenue if generously calculating 121% growth across all four quarters.

Keep in mind, in the chart below, companies over 40x NTM revenue are profitable.

https://images.prismic.io/bethtechnology/eec2961b-8041-4309-ad38-1517843d0a5d_ipo-round-up.png?auto=compress,format

Regarding their business, Snowflake reported 121% revenue growth YoY with a net retention rate of 158%. As stated, the company is not profitable. In the six months ending in July, they spent roughly $190.5 million on marketing while making $149 million in gross profit.

https://images.prismic.io/bethtechnology/63e4e19d-b168-4c31-afe9-40bce529f058_snow-ipo.png?auto=compress,format

I discussed Snowflake’s product strength in detail in my previous analysis, stating it demonstrated: “triple-digit growth, clear product differentiation, key metrics that prove product-market fit and gravity-defying management.” However, the price of the stock has become untethered from reality. As stated in the Forbes article, there is little alpha left over the next year and that is the primary risk.

JFrog

JFrog opened trading at a $71.20, which is 62% above its offering price. This gave the stock a valuation of 40x NTM revenue, which was the highest forward multiple in enterprise software at time of IPO until SNOW started trading about an hour later. The company provides DevOps software to organizations globally, enabling those businesses to build and release software faster and more securely.

JFROG posted an impressive 50% growth rate in its latest quarter with 81% gross margins and  positive 11% FCF margin, which is why they commanded such a high premium. However, the company faces a bevy of competition including Google Cloud, Amazon Web Services, and Microsoft Azure.  JFROG is a pure play, which I tend to favor; however, this IPO valuation is over its skis.

Sumo Logic

Sumo Logic began trading September 17th with an initial offering price of $22 a share. The first trade was 21% above the premium at $26.50 and closed at $26.88. Regarding key metrics, Sumo Logic stated that its dollar-based net retention rate has fluctuated between approximately 120% and 135% for each of the past nine quarters, which is notable. Their forward price/sales based on their opening price gives the stock a valuation of 8.3x NTM revenue.

https://images.prismic.io/bethtechnology/86a0c5a4-0775-436f-bc47-7a236bbd33bb_sumo-ipo.png?auto=compress,format

Sumo Logic’s biggest risk is their competition. Companies such as Splunk, Elastic, Datadog, Dynatrace, Microsoft and Google all have bigger budgets, greater name recognition and a larger customer base.

Amwell

Amwell (AMWL) is a mobile and teleheath platform that connects patients with doctors over video. The stock went public on September 17th with an IPO price of $18. It began trading with 42% premium at $25.51, and closed the day at $23.95.

Amwell’s YoY revenue growth accelerated from 31% year-over-year in 2019 to 77% year-over-year in H1 2020. Based on their opening price, this gave the stock a valuation of 8.4x NTM revenue.  

Unity

Unity (U) is set to open trading September 18th at an expected price range of $44-$48. This would value the company in the range of $11.6B-$12.6B. At the high end of the proposed range, Unity would trade at 14.2x NTM revenue. 

Unity grew revenue 39% YoY in the first half of 2020 and increased its net-retention rate to 142%, a strong indication of increased spending within its existing customer base.  With 93 of the top 100 gaming studios already Unity customers, it is crucial for the company to continue to drive higher spending among existing customers. 

Here’s how the string of tech IPOs stack up this week:

https://images.prismic.io/bethtechnology/2ecfd864-89c9-4c8a-9150-96700b380a8b_ipo-stack.png?auto=compress,format

Gains of up to 485% from our Free Newsletter.


Here are sample stock gains from the I/O Fund’s newsletter --- produced weekly and all for free!

+370% on Nvidia

+485% on Bitcoin

*as of May 02, 2024

Our newsletter provides an edge in the world’s most valuable industry – technology. Due to the enormous gains from this particular industry, we think it’s essential that every stock investor have a credible source who specializes in tech. Subscribe for Free Weekly Analysis on the Best Tech Stocks.

If you are a more serious investor, we have a premium service that offers lower entries and real-time trade alerts. Sample returns on the premium site include 2583% on Nvidia, 806% on Chainlink, and 665% on Bitcoin. The I/O Fund is audited annually to prove it’s one of the best-performing Funds on the market, with returns that beat Wall Street funds.

beth

More To Explore

Newsletter

With Bitcoin at All-Time Highs, Here’s What’s Next for COIN, HOOD

With Bitcoin at All-Time Highs, Here’s What’s Next for COIN, HOOD

Bitcoin and the spot BTC ETFs have clearly seen strong investor appetite since the approval in the beginning of the year. Alongside strong initial adoption of the new ETF class, we’re also seeing majo

June 13, 2024
Jensen Huang Presentation

Here's Why Nvidia Stock Will Reach $10 Trillion Market Cap By 2030

I believe Nvidia can achieve an astonishing $10 trillion market cap by 2030. As you’ll see from the key points to my thesis, there is a bull case where a $10T market cap estimate in a little over six

June 10, 2024
TSMC Building

Taiwan Semiconductor Stock: April Sales Soar From Advanced Nodes

Despite warning of a slowdown in the broader semiconductor industry this year, TSMC’s April sales surged 60% YoY and 21% MoM. This marks a positive start to the 20-percentage point acceleration to 33%

June 02, 2024
Jensen Huang Presentation

Nvidia Q1 Earnings Preview: Blackwell And The $200B Data Center

Nvidia’s management team will focus on the H200 in the upcoming earnings call, but make no mistake, we will end this year in full-on Blackwell territory. The new architecture is at the forefront of tr

May 28, 2024
Amazon Building

Amazon Stock: Nearing $2 Trillion Club From AWS Growth & Ads Catalyst

Amazon is on the verge of joining the $2 Trillion Club, driven by a 4-percentage point accelerating in AWS to 17% YoY growth combined with strong 25% growth in advertising revenue.

May 21, 2024
Big Tech Logos

Big Tech Q1 Earnings: AI Capex Increases As AI-Related Gains Continue

Recent Q1 earnings releases from Microsoft, Amazon, Alphabet and Meta reaffirmed that AI spending is continuing to increase through 2024 as companies seek AI-related revenue gains.

May 14, 2024
The Risk is Higher in the Market than it Feels

The Risk is Higher in the Market than it Feels

In this report, we will show that the sentiment readings over the last several months suggest investors should be cautious. This is backed up by our broad market analysis, which indicates that risk is

May 02, 2024
We Are Raising Our Bitcoin Targets To $106K - $190K

We Are Raising Our Bitcoin Targets To $106K - $190K

Bitcoin is an asset where the bulls pound the table to “buy, buy, buy,” and the bears relentlessly and stubbornly call it a scam. In reality, both are the wrong approach. This is because although Bitc

April 26, 2024
Investing In AI with Beth Kindig: 1-Hour Video Interview

Investing In AI with Beth Kindig: 1-Hour Video Interview

Jordi Visser, CIO and Chairman of Weiss Multi-Strategy Advisers, spoke to Beth Kindig on the Real Vision podcast on March 20th, to dive deep into AI’s potential for explosive economic growth, how to f

April 19, 2024
https://images.prismic.io/bethtechnology/Zh50DEaI3ufuUONy_SemiconductorStocksQ4OverviewAIGainsHeatUp.jpg?auto=format,compress

Semiconductor Stocks Q4 Overview: AI Gains Heat Up

Semiconductor stocks are standout performers so far in 2024, with investor appetite for AI stocks remaining elevated as AI chip leader Nvidia continues its streak of high growth.

April 15, 2024
newsletter

Sign up for Analysis on
the Best Tech Stocks

https://bethtechnology.cdn.prismic.io/bethtechnology/e0a8f1ff-95b9-432c-a819-369b491ce051_Logo_Final_Transparent_IOFUND.svg
The I/O Fund specializes in tech growth stocks and offers in-depth research for Premium Members. Investors get access to a transparent portfolio, a forum, webinars, and real-time trade notifications. Sign up for Premium.

We are on social networks


Copyright © 2010 - 2024
Get Free Weekly Analysis on the Best Tech Stocks