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16 Jul, 2019

What is Going on With 2019 IPO Debuts?

What is Going on With 2019 IPO Debuts?

Disciplined investors may feel like they missed out on some of the companies that debut on the market this year. More than half of 2019′s newly-public stocks are up about 9% from their IPO price.

The biggest winners include Beyond Meat, Zoom Video and Revolve Group. You need to realize that sooner or later there will be a correction in the class of 2019, and when that happens.

We want you to keep your composure, focus on your favorite names and be selective, so you can view the sell-off as a buying opportunity, not a calamity. There are the following recommendations on the newly-public companies:

Levi

Levi Strauss kicked off the IPO cycle in March. Back then, the stock was too expensive and that we would buy it on a pullback to $20. The stock has fallen almost $3 since reporting a disappointing quarter Tuesday. Honestly, even under $20, we not even sure if we want to buy it after recently we have heard from the management

Lyft

Lyft peaked north of $88 the first day it went public in March. The stock tanked to $47 in May and has recovered some of those losses by Wednesday’s close at $62.30. We would buy shares below $75, but there was less demand on the market than he projected.

As Churchill might say, ‘Not my finest hour.' In retrospect, we have a lot of concerns about the sustainability of the business and Lyft’s slowing growth. There are better places to put your money.

Tradeweb Markets

Tradeweb Markets, which is a play on digital trading, went public in April and has seen a 31% gain. The stock finished Wednesday’s session below $48. We suggested now is a good time to trim some holdings of Tradeweb, but «let the rest ride.»

Pinterest

We admit that we gave conservative advice on Pinterest, which hit the market in mid-April. The stock closed Wednesday at $26.58, nearly $3 above its opening trade price. We think it’s worth owning, although we’d like it a lot more, of course, on a pullback

Zoom Video

Zoom Video turned out to be «one of the hottest deals of the year.» Shares opened at about $65 and hit $107 in June. The stock has cooled of and finished Wednesday’s session below $93.

We were very worried about valuation here from the get-go, which in retrospect was a big mistake. Still, Zoom sells for 33-times next year’s sales, not earnings. We can’t get behind anything that expensive. We are afraid you’ll get hurt.

Beyond Meat

We have been too cautious about, but discipline should always trump conviction in this business, and discipline tells, that Beyond Meat is a cult stock. … That’s way, way too hot for us to touch…

Uber

Shares of Uber, the second major ride-sharing service to go public in 2019, have climbed 21% from the lows it set in May. Unlike Lyft, Uber actually reported a solid quarter right out of the gate. We are warming up to this one, but we want to see another good quarter before we are ready to really say, you know what, ‘Uber is for real.'"

Out of the rest of the class, we recommend buying Revolve Group, Chewy and The RealReal on a pullback. Slack is a good stock pick under $40.

As for Luckin Coffee and CrowdStrike, we aren’t buying it here.

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