Early investors in Party City Holdco Inc (NYSE:PRTY) will be celebrating today as the Party City IPO comes to fruition. Shares of the party supplies retailer went public on the New York Stock Exchange on Thursday, trading under the ticker “PRTY”.
The Party City IPO price was $17 per share, the high end of its $15 to $17 range. With nearly 22 million shares hitting Wall Street today, PRTY stock will raise about $372 million for the company, garnering a valuation of roughly $2 billion.
“Party on, Wayne!”
It sounds a bit absurd, but the Party City IPO is no joke. As far as retailers go, the company enjoys unique staying power and growth prospects, as party supplies have oddly enough proven to be pretty recession-proof. People need their whizbangs, streamers and confetti even when the economy is in the dumps, it seems.
In that respect, PRTY is akin to the film industry, which didn’t suddenly grind to a halt merely because there was an unprecedented global financial crisis a few years ago. People will always need to escape; whether they use cinema or Hello Kitty birthday merchandise to distract themselves is up to the individual.
The numbers corroborate the story, and Party City stock could become a Wall Street mainstay if it keeps doing what it’s doing. With the initial PRTY stock price yielding a market capitalization of $2 billion, its closest true peers are Michaels Companies Inc (NASDAQ:MIK) and Big Lots, Inc. (NYSE:BIG), though neither is a pure play on party supplies quite like Party City.
A quick look at the recent performance of MIK stock and BIG stock should get investors psyched for the Party City IPO: The MIK stock price is up 65% in the last year while the BIG stock price has gained 20% over the same period.
But the most compelling reason investors should consider putting some Party in their portfolio is PRTY stock’s growth prospects. While Big Lots revenues have fallen in two consecutive years and Michaels sales growth has stagnated around 3% to 4% since fiscal 2011, Party City grew sales by 9.2% last year.
“Party on, Garth!”
Party City stock, in the coming years, will be fueled simply and plainly by store count expansion, same-store sales growth, acquisitions, and global and online ambitions.
With a current store count of 900, PRTY told investors in its S-1 filing that it aimed to net 30 new stores each year. Party City stores pay for themselves after three years on average, and same-store sales growth of 5% in the first quarter is more than double the 2.2% same-store sales growth seen by MIK stock in its most recent quarter.
In other words, PRTY stock is one party where you might want to arrive early.
As of this writing John Divine held no positions in any of the stocks mentioned. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
