In downtown Manhattan, the bankers are getting bored. So far in
July, there have been only three small IPOs completed, after the
markets welcomed nine new issues in June, 14 in May and 22 in
April. Though the spigot has slowed to a trickle, these bored
bankers will soon be busy. Five new issues are expected to be
priced this week, led by:
• Palo Alto Networks, which provides computer network
security software
• Kayak Software, a travel search-engine operator
• Fender Musical Instruments, known for its eponymous
guitars
• Five Below, a discount retailer
• Durata Therapeutics, a research-stage biotech firm
If you're looking for a good deal with a new
IPO
, then you can do better than these firms. Instead, check out five
other recent IPOs that are now selling far below their peaks. With
newly-lowered share prices, these fresh IPOs have already seen the
wind taken out of their sails -- a key consideration of the
market
slumps to fresh lows. Here are five names worthy of further
research:
1. Splunk (Nasdaq:
SPLK
)
Peak price: $37.57
Current Price: $28.40
This had been a hotly-anticipated IPO -- and for good reason.
Splunk is a play on "big data," an emerging trend that has
companies focusing on the best ways to analyze the massive amounts
of information that flow out of networks every day. Splunk has
emerged as the largest standalone player in the space, boosting
sales from $18 million in 2008 to a projected $175 million in
2012.
It's not a cheap stock, trading for more than 10 times sales,
and meaningful profits are likely a few years out. Yet, with the
tough market erasing more than $600 million in
market value
since the end of May, this recent IPO is worth a fresh look for
investors seeking companies with potentially very robust
growth.
2. Yelp (Nasdaq:
YELP
)
Peak price: $32
Current price: $21
This merchant rating service now tracks more than 600,000
locations with a reported 25 million cumulative reviews.
Yahoo (Nasdaq:
YHOO
)
,
Local.com (Nasdaq:
LCOM
)
and others have tried to make a big dent in this market, but Yelp
has emerged as the leader. Just as the case with
eBay (Nasdaq:
EBAY
)
many years ago, growth has been viral as a greater number of
consumers attracts the presence of more merchants, which in turn
makes it an even broader platform for consumers.
In the quarters ahead, Yelp aims to deepen its presence among
smart phone users and plans to roll out its service
internationally. That's expected to keep sales growing at a 40% to
50% annual pace, perhaps reaching $250 million by 2014. But
investors shouldn't expect to see meaningful profits until at least
2014, which may keep
shares
from moving past that $32 peak for the next few years.
3. Brightcove (Nasdaq:
BCOV
)
Peak price: $25.50
Current price: $14.25
This company, which helps build and operate video delivery
websites, recently made a splash by announcing it was giving away
free tools to help companies make video-serving apps for smart
phones. One key beneficiary:
Apple (Nasdaq:
AAPL
)
, which would love to see an eco-system develop around its
anticipated Apple TV launch.
There's no question the worlds of TV and Internet video are
rapidly colliding. Brightcove aims to enable its 4,300 clients to
deliver video in a range of formats. Right now, the company
generates roughly $20 million revenue per quarter with roughly 65%
gross margins. Still, as is the case with many new IPOs, it
might be a few years before Brightcove generates net profits. As
such, investors should temper their expectations for near-term
gains.
4. Tumi Holdings (Nasdaq:
TUMI
)
Peak price: $29
Current price: $16
This luxury goods retailer was a hot IPO, in part because
Wall Street
bankers and brokers are often big fans of the brand's luggage and
other travel items. Tumi operates about 100 stores, with plans to
open 10 annually, especially in overseas markets with robust luxury
goods demand. Tumi is expected to earn close to 70 cents a share
this year, and
earnings
per share could exceed $1 once the global
economy
starts to rebound.
5. Guidewire Software (Nasdaq:
GWRE
)
Peak price: $38
Current price: $25
The insurance industry is quite mature, but this software
provider is uniquely positioned to outgrow the market. Guidewire
offers software that helps insurers manage the billing and claims
process -- an especially handy service for smaller insurance
agencies that lack the funds to develop cutting-edge software that
firms such as
Allstate (Nasdaq:
ALL
)
and State Farm use.
Sales shot up from $87 million in fiscal (July) 2009 to a
projected $205 million in the
fiscal year
that ends in July. Analysts at Citigroup forsee strong growth
ahead, with sales hitting $285 million by fiscal 2014.
Risks to Consider:
As these companies haven't been public very long, they have yet
to establish a long-term shareholder base. This leaves them
vulnerable to heavy selling if the market slumps badly and
investors cling to the stocks they've known a long time.
Action to Take -->
While many investors like to focus on brand new stocks, it's
the IPOs that are three to six months old that often
offer
better value as there is less hype around them.
-- David Sterman
David Sterman does not personally hold positions in any
securities mentioned in this article. StreetAuthority LLC does not
hold positions in any securities mentioned in this article.