In 2020, the number of initial public offerings (IPOs) picked up serious pace despite the pandemic as the stock market soared and investors pondered new issues.
In fact, the volume of IPOs reached 494, more than doubling 2019’s figure, while the share offerings raised $174 billion, a 150% jump from 2019, according to FactSet. The third quarter alone saw a record 168 IPOs, while companies raised a massive $53.8 billion in the fourth quarter.
IPOs were also larger, on average, in 2020 than in 2019. The average IPO in 2020 was $353 million, or about 22.5% higher than in 2019.
You might recall that there was a lot of excitement surrounding the IPOs of cloud provider Snowflake Inc. (NYSE:SNOW), meal delivery service DoorDash, Inc. (NYSE:DASH), software company Palantir Technologies Inc. (NYSE:PLTR), digital prescription company GoodRX Holdings, Inc. (NASDAQ:GDRX) and video game developer Unity Software Inc. (NYSE:U).
Now that these companies have released their first quarterly results since going public, let’s see how the numbers stack up.
Snowflake Inc.
When Snowflake made its public debut back in September 2020, Wall Street was aflutter as Warren Buffett and his flagship investment firm Berkshire Hathaway (NYSE:BRK.B) took an early stake — an unusual move for the company that rarely buys IPOs.
The company raised $3.4 billion at an initial price of $120 per share and had an initial market cap of $33 billion, making it the largest software IPO in history.
For the fiscal fourth quarter, Snowflake saw an earnings loss of $0.16 per share, beating analysts estimates by 14.3%, while sales of $190.5 million beat estimates by 6.7%.
The stock started out strong, soaring to a high of $429 on December 8, 2020. But the tech pullback that has affected many names also hit SNOW, which has since fallen back about 45% from the high. Shares are down about 18% so far this year.
DoorDash, Inc.
The food delivery service was founded in 2013 and had its highly anticipated IPO in early December 2020 as the pandemic raged across the country and people ordered in. Shares debuted at $102 with a market cap of $72 billion.
Leading up to its IPO, DoorDash had reported a $667 million loss in 2019 and a $149 million loss for the first nine months of 2020.
Shares were listed at $102 at the IPO and the company raised $3.4 billion, making it another one of the largest IPOs of the year.
For its fourth quarter of 2020, the company reported sales of $970 million, beating Wall Street’s estimates by $28.2 million. However, the company had an earnings loss of $2.27 per share, which missed analysts’ expectations by a whopping $1.97 per share.
The stock closed 86% higher on its first day and climbed to a high of $256 per share on January 27, 2021. But DoorDash’s share price has fallen from those highs and is down 47% as investors weigh the company’s negative earnings.
Palantir Technologies Inc.
The data company that has worked for the CIA and other government agencies was co-founded in 2003 by investing legend and Facebook (NASDAQ:FB) board member Peter Thiel.
Palantir went public in September 2020 and the stock debuted at $10 per share with a valuation of $15.2 billion.
During the fourth quarter of 2020, the company brought in $322 million in sales, which beat analysts’ estimates by $21 million. However, the company had a net loss of $156 million, or $0.08 per share, while analysts expected a gain of $0.03 per share. Unfortunately, this is par for the course for PLTR, as the company has yet to turn a profit in its 17 years of existence.
The stock hit a high of $45 on January 27, 2021, and has dropped back to around $23 per share. So far this year, the stock is about flat.
GoodRX Holdings, Inc.
The online discount prescription drug service was founded in 2011 by another Facebook alumni, Dough Hirsch and software entrepreneur Trevor Bezdek. The site offers discount cards and coupons for prescription drugs.
However, the pandemic lockdowns have lowered the need for certain drugs as flu rates have dropped substantially. The results have translated to the company’s bottom line.
For the fourth quarter, GoodRX brought in sales of $154 million, beating consensus estimates by 4.2%. However, the company also reported a net loss of $298.3 million. Earnings came in at a $0.74 per share loss and missed estimates by $0.07 per share.
The company officially hit the market on September 23, 2020, at $33 per share, and rocketed to $50.50 by the end of the first trading day with a market cap of about $19.4 billion. For a short time, investors piled into the stock, which reached a high of $64.22 six days later. It is now down 37% from the recent high, and has decreased 1%, year-to-date.
Unity Software Inc.
The mobile video game developer was founded in 2004 and focuses on making software used by other studios to create game sensations like “Fall Guys,” “Pokemon Go” and “Call of Duty: Mobile.”
The company debuted its per-share price at $52 in September 2020 and prices soared over 31%, giving it a market cap of around $17 billion.
During the fourth quarter, Unity Software reported revenue of $220 million, beating estimates by nearly 8%. An earnings loss of $0.10 per share beat estimates by 33%.
Unity Software’s stock hit a high of $174.94 on December 23, 2020, but soon hit a rough patch and has fallen over 42% since. Year-to-date, the stock is down 34%.
The Bottom Line for IPOs in 2020
The reality is that although IPOs may look promising, they don’t have a proven track record and plenty are burning cash. This makes them more risky and volatile.
This is why I focus on only fundamentally superior stocks. These are the types of growing companies that investors will rotate to as Wall Street looks past the hype and focuses more on the companies’ fundamentals.
In order words, stocks with strong earnings and sales growth, which also describes my Growth Investor Buy Lists stocks to a “T.”
My average Growth Investor stock has had its earnings revised 16.7% higher in the past three months. Typically, positive analyst revisions precede future earnings surprises. In addition, my average stock is characterized by 66.1% average annual sales growth and 276.4% average annual earnings growth. So, I am expecting a spectacular first-quarter earnings announcement season for my Growth Investor stocks, with my companies set to post wave-after-wave of positive earnings results.
As always, my Growth Investor Buy Lists are “locked and loaded” for the coming earnings season. If you want your portfolio to be, too, now is an especially great time to join Growth Investor. I just released four new stocks in my Growth Investor April Monthly Issue last Friday – two High-Growth stocks and two Elite Dividend Payers. Every stock earns an A-rating in Portfolio Grader, and my Elite Dividend Payers also hold an A-rating in Dividend Grader, making them rare AA-rated stocks.
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Sincerely,
Louis Navellier
P.S. I just released my latest Portfolio Grader 500 this morning, a quarterly list of some of the best and worst stocks on the stock market right now. In it, you have access to 250 A- and B-rated powerhouses and 250 D- and F-rated sell immediately stocks. As a valued Growth Investor subscriber, this reference guide is yours free. Read it here now.
The Editor (Louis Navellier) hereby discloses that as of the date of this email, the Editor (Louis Navellier), directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:
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