Whatever your thoughts on 2021, there’s no denying it has been a banner year for IPOs. In the US alone, we’re on track to see about 1,000 companies join the ranks of the publicly traded. That’s a plurality of the approximately 2,850 businesses that have gone public globally – and we still have a full month to go. By mid-November, the newly public companies had raised a global total of more than $600 billion.
This brings us to Morgan Stanley. The banking giant's stock analysts have been looking for the equities primed to gain, and they’ve tapped two stocks new to the public markets as likely to jump 100% or more in the coming months. Not to mention, both have earned a “Strong Buy” consensus rating from the rest of the Street. Let's take a closer look.
Rent the Runway (RENT)
First up is a company in the e-commerce field, with an interesting twist. Rent the Runway makes contemporary fashion available to everyone, through 4- to 8-day clothing rentals. Customers can choose a one-off rental, or buy a subscription service, and clothing is available for special events, everyday use, children, even sports. Accessories, such as jewelry and handbags, are also available, and rents include care and dry-cleaning of the clothing.
All of this would generate interest – but Rent the Runway has another claim to fame, too, as the CEO and all of the top company officers are women. Founder Jennifer Hyman built the company on the idea that all women should have access to an unlimited designer closet. Her idea took hold, and now her company boasts over 2.5 million lifetime customers, of whom 88% were acquired organically.
This company held its IPO in October of this year, debuting the RENT ticker on Wall Street on October 27. The IPO saw 17 million shares go on the market, at $21 each. This was above the expected pricing of $18 to $21. Overall, RENT brought in $357 million from the IPO.
Morgan Stanley analyst Lauren Schenk looks at RENT, and takes a bullish stance, writing, “We see RENT’s market-leading, innovative fashion rental subscription business in early innings with a clear path to profitability: RENT is the largest women's fashion rental business, with significantly larger share than all other players in the market combined. We see the fashion rental space as a winner-take-most/all market with RENT building a deep competitive moat through its broad inventory assortment, strong brand relationships, complex reverse logistics network, and unique inventory models.”
Unsurprisingly, Schenk rates RENT an Overweight (i.e. Buy), and sets a $28 price target that implies room for a substantial 125% upside in the next 12 months. (To watch Schenk’s track record, click here)
Wall Street is in broad agreement with the Morgan Stanley take. This new stock has a unanimous Strong Buy consensus rating, based on 9 analyst reviews. RENT shares are trading for $12.44, and their $22.78 average target suggests an 83% one-year upside potential. (See RENT stock analysis on TipRanks)
IO Biotech (IOBT)
The next company we’ll look at, IO Biotech, is a clinical-stage biopharma, working on a new approach to cancer vaccines. The company’s proprietary T-win platform is designed to develop novel immunotherapies that stimulate the body’s own immune system to suppress tumors. IO Biotech has an active research pipeline, with its lead drug candidate, IO102-IO103 under investigation in multiple clinical trials as a treatment for various solid tumors.
The leading research track is a Phase 2 study of IO102-IO103 in the treatment of advanced melanoma. The drug candidate was granted a Breakthrough Therapy Designation (BTD) by the FDA one year ago, and has since demonstrated clinically significant results on the melanoma track. Results from the current Phase 2 study are expected in the second half of next year. The company will also shortly initiate a Phase 3 trial assessing IO102-103 plus pembrolizumab for the treatment of metastatic (advanced) melanoma with interim data anticipated by the end of 2023.
The active research pipeline was a key attractor for investors in the IPO, which was held in November. The IOBT ticker started trading on November 5, and the offering was fully subscribed. The company put 7.15 million shares on the market at $14 each; when the offering closed on November 9, 8,222,500 shares had been sold, including the underwriters’ options. The IPO raised a total of $115.1 million in gross proceeds.
Analyst Matthew Harrison, in his coverage for Morgan Stanley, points out that this company’s new development platform is a major point of interest to investors.
“Immunotherapy has become the standard of care and backbone of combination therapies for many cancers. However, due to the immunosuppressive tumor microenvironment, immunotherapy only works in some patients and in selective cancer types (e.g., PD-1 positive vs. PD-1 negative). IO Biotech aims to address the challenges of current immunotherapies through their T-win platform, which select targets and epitope within the TME designed to simultaneously activate the body's immune cells while also eliminating cells that bear immunosuppressive properties,” Harrison wrote.
"Overall, based on promising clinical data and broad pipeline expansion opportunities, we believe IO Biotech is well positioned," the analyst summed up.
To this end, Harrison rates IOBT an Overweight (i.e. Buy), and sets a $21 price target indicating confidence in a robust 178% potential upside. (To watch Harrison’s track record, click here)
This is another new stock with a unanimous Strong Buy rating; all three of the recent reviews are positive. The stock’s current trading price is $7.56 and its $20.50 average price target implies an upside of ~171% from that level. (See IOBT stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.