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The IPO scene these days is pretty cool, aye?

It’s been looking increasingly like a party that just about everyone wants to get into.

I’m talking hats, streamers, balloons, bottles of champagne.

The theme? ……. A throwback to 1999.

I’m not kidding though— according to University of Florida finance scholar, Jay Ritter, the average first-day returns of IPOs this year has been 42%…

That’s the highest average since the internet bubble, and it doesn’t even include the past two weeks.

The only difference is that the hot tech companies going public these days are less speculative— they’re older companies that have a demonstrated history of revenue.

Like Snowflake (SNOW).

It was one of several other software companies, including JFrog (FROG) and Sumo Logic (SUMO), to go public last week.

Anybody who’s been following the IPO market lately knows that investors were pounding at the door to get a piece of the excitement on this company.

And I’ll admit, I was one of them… it was obvious by looking at the company’s 174% past year revenue growth that it had massive potential.

But here’s the thing, guys… we have to be smart about how we choose to enter these IPOs if we want in right away.

SNOW priced at 120 and opened 2 times higher at 250.

We need to put limit orders on our entries to specify the maximum price that we are willing to pay.

Those placing market orders on SNOW were surely the drunk ones to leave the party, getting hammered with prices of $275+ per share.

But today I want to release a watchlist of some new IPOs that I have my eyes on.

There’s a smart way to play these, so we’re not left intoxicated behind the wheel.

 

GoodRx Holding: GDRX


GDRX commenced trading yesterday, September 23, 2020.

What it’s all about:

  • An app that lets consumers find lowest price offers for their prescription drugs
  • Recently acquired HeyDoctor and expanded into telemedicine, now offering remote doctor appointments

What’s to love:

  • Company’s business model lowers the price of prescriptions drugs— a great thing for consumers, medical professionals, not to mention it addresses a highly political issue
  • Profitable(!!!)— company netted $66M in profits in 2019 on revenues of $388M
  • Net profit for first halfof 2020 is $55M on revenues of $256.7M
  • Gross margin of 95%(!!!) with technological and general expenses remaining flat
  • No huge competitors in immediate sight

What’s to worry about:

  • Manageable, yet higher end levels of debt: ~$700m vs ~$500m in assets pre-IPO
  • Lucrative industry, competition won’t take long
  • Received sky high valuation following open, given how great the company really is

For more info about GoodRx, check out the company profile I wrote up on it here.

 

Palantir Technologies: PLTR


PLTR is expected to commence trading on September 29th, 2020.

What it’s all about:

  • Big Data company co-founded by Peter Thiel
  • Made a name for its data analysis software that’s used to uncover fraud and help with intelligence analysis at all levels
  • One of the hotter, much anticipated IPOs of the year

What’s to love:

  • Truly a tech leader in its field, one of a kind, well-respected and established brand in a hot industry
  • Amount of data is growing exponentially as we speak— plenty of work for the company for years ahead
  • $743M in revs in 2019, expected to grow at least 25% YoY; 67% gross margin
  • Growth is accelerating— first half 2020 revs grew at an astonishing 49.1% YoY

What’s to worry about:

  • Company is yet to turn a profit, despite 2 decades in business
  • Already valued at $20 billion by latest VC backers— not cheap for a money blower, that’s yet to hit even $1bil in annual revs
  • Co. is dependent on external infrastructure providers— its products run on Amazon’s AWS and Microsoft Azure’s cloud solutions
  • Receives a lot of ethical criticism and controversial publicity— e.g. working with ICE

 

Asana: SANA


SANA is expected to commence trading: this week, 21st-25th of September, 2020

What it’s all about:

  • Workplace collaboration/Project Coordination software
  • Founded by Dustin Moskovitz of Facebook
  • Ranks #17 in this year’s Forbes Cloud 100

What’s to love:

  • Hot sector that’s projected to grow 50% over the next 3 years
  • Revenue is $143M and has grown 86% YoY
  • Insane dollar based net retention rate of 120%— customers increase their spending once on the platform
  • 1.2 million paying users and 3.2m free— AT&T, Google and NASA are among customers

What’s to worry about:

  • Losses grew to $119m at a rate of 138% YoY— faster than revenues
  • A lot of competition— and by that we mean, A LOT! Atlassian, Trello, Basecamp, Salesforce are up and coming, just to name a few.
  • $5B valuation that’s likely to be higher on the commencement of trading— 26.2x forward looking revs— a lot for a firm with high competition and no clear path to profitability

 

How Am I Trading These IPOs?


I alert my premium IPO Payday subscribers nearly everyday on what I’m looking to jump in and out of in the IPO market.

With all the excitement happening in the IPO market lately, right now is a great opportunity to get involved.

To learn how to get involved and see what strategies I’m using, check out my latest IPO trading workshop here.

Author:
Ben Sturgill

Ben leads two services at RagingBull. IPO Payday can help you pinpoint, position, and profit from IPOs. In Daily Profit Machine Ben guides day and swing traders to profit by trading the SPY Index. Ben hosts the RagingBull.com podcast where he shares thoughts on wealth and success with traders, businesspeople, entrepreneurs, and experts to uncover and share some of the wisdom needed to live a successful life.

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