3 Recent IPOs I’m Watching Closely
The Federal Reserve announced on Wednesday that it will lower interest rates by 25 basis points. This is the first cut we’ve seen in a decade, and rates are already low by historical standards.
Cheaper money, by design, is intended to stimulate the economy and to make sure investing is still preferable to saving.
Another upshot: more financing available to private companies. And it’s not just private equity.
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In the past few years, mutual funds and hedge funds have been actively investing in privately-held tech companies and startups in their search for market-beating returns. This brings more money to private companies, and paves the way to building relationships and to receiving more shares when those companies go public.
Here’s another byproduct of low interest rates: companies stay private for longer. Amazon (Nasdaq: AMZN), Netflix (Nasdaq: NFLX) and Google (Nasdaq: GOOGL) went public in the late 1990-early 2000s only three, five and six years after being founded. The new crop of IPOs, by contrast, have been operating as private companies for a decade or more.
The IPOs of 2019 have continued this trend. They are also typically older, more established, and have been building their prospective businesses for longer than the companies of the dot-com era. At the same time, they’ve enjoyed good funding and the ability to stay unprofitable for longer, too.
And because they already have well-established businesses and name recognition, shares of many of these companies jump in their public debut. PagerDuty (NYSE: PD), a tech company, and Pinterest (Nasdaq: PINS), a photo-sharing business, were founded in 2009 and 2008, respectively (and rallied 60% and 28% on the first days of trading in April). Phreesia (NYSE: PHR), a medical software company that debuted just a couple weeks ago and rallied 40% in its first day, was founded in 2005.
#-ad_banner-#If despite these differences, this environment still reminds you of the halcyon days of the dot-com boom, you are correct. This IPO market is the busiest since then. As of today, the U.S.-based stock exchanges saw 124 companies come public this year. Not counting Livongo Health (Nasdaq: LVGO) and Health Catalyst (Nasdaq: HCAT), two health-tech companies that are debuting as I write this, the total amount raised by all IPOs has reached $42.3 billion year-to-date, the most since 2000.
As we all know, many dot-com era IPOs are now gone altogether. But the best of them — including the aforementioned Amazon and Netflix, or Yahoo! (now part of Verizon (NYSE: VZ), and Priceline (now known as Booking Holdings (Nasdaq: BKNG)) — went on to live and prosper.
And while today’s IPO market looks richly valued, long-term investors can still benefit from selectively venturing into this field.
2019 IPOs I’m Watching Closely…
My favorites of 2019, so far, include a couple of well-known names and one company that is still a relatively unknown business. But that is likely to change.
I’ve already mentioned that Phreesia (NYSE: PHR), a health-care software maker, rallied at its debut. But I think its price is going still higher. That’s because this company is transforming our medical-office experience.
Phreesia’s software and hardware improve the patient intake process. You know those clipboards at the front desk? If Phreesia grows the way it can, they will be gone, replaced by tablets for check-ins.
Phreesia is also making software to automate appointment scheduling, as well as insurance verification and copay collection. Mobile tools are not overlooked, either — the company is actively developing the mobile versions of its products and software.
In its latest year as a private company, Phreesia has processed more than 70 million patient visits for approximately 50,000 individual providers in nearly 1,600 healthcare organizations across all 50 states. The company also processed more than $1.4 billion in patient payments.
At this time, I believe investors should actively watch the two ride-share giants that debuted this year, Uber Technologies (NYSE: UBER) and Lyft (Nasdaq: LYFT).
Uber debuted at $45 per share on May 10. Not only does it still trade lower than the IPO price, but its actual public offering in 2019 was much lower than the $120 billion valuation originally discussed in 2018. Now trading under $44 per share (and commanding a market cap of $74 billion), Uber looks interesting.
Lyft, too, hasn’t lived up to its per-IPO expectations. Debuting at $72 per share on March 29, it now trades at under $65.
Action To Take
The creator of a new digital front door to the doctor’s office, Phreesia is one company to keep an eye on as a potential future addition to my premium newsletter, Fast-Track Millionaire.
Both Uber and Lyft trade below their IPO prices, and, together, they dominate the ride-share business. And remember that market-dominating companies have a strong chance of continuing their winning streaks. Of the two, I prefer UBER, the larger and more dominant player.
P.S. Aside from the recent IPOs mentioned above, I’m also watching another area closely…
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