by Tom Taulli | December 28, 2012 12:55 pm
When Ruckus Wireless (NYSE:RKUS) came public in mid-November, investors were not interested. The shares plunged 18.3% on its first day of trading.
But it actually turned out to be a huge opportunity. Since the public offering, RKUS has surged about 84%.
So why the big miss? Keep in mind that the IPO market can get easily fidgety, especially when the general market is in a tailspin. And this was the case when Ruckus pulled off its IPO. At the time, the markets were falling in the wake of the Presidential election.
But for investors with a long-term view, it was certainly worth taking the time to read Ruckus’ S-1. You would have noticed that the company — which is a top gear maker for Wi-Fi installations — had a strong track record of growth. For the first nine months of 2012, revenues nearly doubled to $152.5 million, and earnings went from breakeven to a profit of $7.4 million.
The S-1 also had a great section called “Industry Background.” In it, Ruckus pointed out that devices running on Apple‘s (NASDAQ:AAPL) iOS 6 and Google‘s (NASDAQ:GOOG) Android were driving hyper growth in Wi-Fi. It also mentioned a study from Infonetics Research, which had a forecast showing the market going from $296 million in 2011 to $2.8 billion in 2016. That’s a sizzling 57% compound annual growth rate.
Still, going forward investors may want to temper things their sentiment. Consider that Lazard (NYSE:LAZ) analyst Ryan Hutchinson has a price target on the stock of $23. Ruckus is currently trading at $22.50.
But the main lesson here is that whenever the general market swoons, that may be an opportunity to pick up a hot IPO at a cheap valuation.
Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of “How to Create the Next Facebook” and “High-Profit IPO Strategies: Finding Breakout IPOs for Investors and Traders.” Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
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