The Snap Inc (NYSE:SNAP) initial public offering has been volatile, and it’s far from one of the best IPOs the market has seen, but shares of Snapchat’s parent company are still up nearly 30% from the offering price.
But winning IPOs aren’t made in the first few days. Take Facebook Inc (NASDAQ:FB), which barely budged on its first day of trading in 2012 — a rarity for a hot IPO — and lost 34% in its first year on the public market. But patient investors (especially those who took my advice to wait until the IPO hubbub had cleared) are now sitting on more than a tripler, as Mark Zuckerberg showed what he could do with his ideas and some fresh capital.
Snap has done all investors — you, me and anyone else willing to go after IPOs — a favor, though.
Snap Inc raised a cool $3.4 billion at a market capitalization of around $25 billion — the largest public offering since Alibaba Group Holding Ltd (NYSE:BABA) hit the markets in 2014. The overall markets have been in rampant bull mode, and IPOs returned a collective 25% last year, so it was a good theory that Wall Street would be hungry for IPOs.
Snap’s well-received IPO was the confirmation we needed.
If you’re looking for fresh blood, then, today I’ll walk you through seven of the best IPOs to buy for the rest of 2017, including a couple that will have their IPOs in March. They might not come public with the same pomp and circumstance as Snap, but they could end up being better buys.
The Best IPOs to Buy for the Rest of 2017: MuleSoft
IPO Timetable: Week of March 13-17
Running an IT department isn’t getting any easier. The pace of change continues to accelerate, and there are increasing types of technologies to manage, including the cloud, mobile, big data, analytics and the internet of things (IoT).
That’s where MuleSoft comes in.
MuleSoft develops APIs that help to connect disparate technologies and platforms. That not only allows for real-time access to critical information, but it results in lower costs for customers.
The revenue growth ramp has been impressive, with sales jumping from $57.6 million in 2014 to $187.7 million in 2016. Like Snap, though, the company does lose money, including $49.6 million in red ink last year.
MuleSoft currently boasts more than 1,000 customers, as well as 30 contracts that exceed $1 million in annual revenues. Still, there should be a ton of room for growth, as according to MuleSoft’s own estimate, the market opportunity is a hefty $29 billion.
The Best IPOs to Buy for the Rest of 2017: Ring
IPO Timetable: Late 2017 (estimated)
Innovators have a knack for re-imagining ordinary things.
This is the case with Ring founder Jamie Siminoff, who thought the doorbell could use a little freshening up. For instance, what about a doorbell that provides security for the home by using online video?
Or, as his wife called it, “Caller ID for the front door”?
Making this a reality was far from easy. In fact, Siminoff pitched Ring on Shark Tank and was rejected by all the investors except Kevin O’Leary, who offered a fairly tough deal. In the end, Siminoff went on to seek out other investors.
That ended up being a path to success. The airing of the show helped gin up sales for the Ring product, and since then, Siminoff has raised more than $209 million from investors including Richard Branson and Goldman Sachs Group Inc (NYSE:GS).
A Ring IPO could come near the end of this year, and Ring should have plenty of excitement in store for potential investors. The company is the leader in its category at roughly 95% of the market in the U.S. And Gartner research says the general security market is forecast to grow at 26% annually to $11.5 billion by 2020.
The Best IPOs to Buy for the Rest of 2017: BJ’s Wholesale Club
IPO Timetable: Second half of 2017 (estimated)
BJ’s Wholesale Club is a membership warehouse club — a la Costco Wholesale Corporation (NASDAQ:COST) — with a presence in the eastern part of the U.S., sporting 210 locations and more than 25,000 employees.
Leonard Green & Partners and CVC Capital Partners took BJ’s Wholesale Club private in late 2011 via a $2.8 billion deal. As a result, there are no publicly available financials. However, according to estimates from Forbes, BJ’s Wholesale Club’s revenues hit $10.88 billion last year.
Primary locations, which are roughly 114,000 square feet, have a wide assortment of offerings, ranging from groceries and home goods to electronics and cleaning supplies. BJs.com is also a critical part of the company that offers exclusive discounts.
The timing for a BJ’s Wholesale Club IPO is about as good as it will get, considering that Costco has been churning out nice returns for investors, at about 85% over the past five years. By comparison, Target Corporation (NYSE:TGT) is off 4% and Wal-Mart Stores Inc (NYSE:WMT) is up 17%.
The Wall Street Journal reported in February that BJ’s is preparing for an IPO that could come in the second half of 2017.
The Best IPOs to Buy for the Rest of 2017: Cloudera
IPO Timetable: Next six months (estimated)
Cloudera, founded in 2008, is a software development company operates a platform based on the open-source Apache Hadoop system, which allows for high-end analytics and big data applications. Cloudera’s specific focus is the enterprise.
The founders are veterans of some of the leading companies in Silicon Valley including Alphabet Inc (NASDAQ:GOOGL), Oracle Corporation (NYSE:ORCL) and Facebook. And its chief architect, Doug Cutting, is co-creator of Hadoop.
The Cloudera system has wide applications. For example, the company has entered a partnership with Navistar International Corp (NYSE:NAV) to develop data management and analytics for connected trucks, buses and defense vehicles. Says the CIO of Navistar:
“By collecting and analyzing our vehicle telematics, we have reduced maintenance costs and vehicle downtime by almost 40% and have implemented remote monitoring coverage to more than 250,000 vehicles. Cloudera’s platform enabled us to ingest not only IoT and telematics data from sensors, but meteorological, engineering, traffic and vehicle usage, and access and analyze all these different data types in ways that weren’t possible before.”
The last financial disclosure for Cloudera was for fiscal 2015, when the company surpassed $100 million in revenues. Cloudera has raised $670 million to date from investors including Intel Corporation (NASDAQ:INTC), Accel Partners and Greylock Partners.
Cloudera already has made a confidential filing for its IPO with the SEC, so now things are just a question of when. Lead underwriters will include Morgan Stanley (NYSE:MS), JPMorgan Chase & Co. (NYSE:JPM) and Bank of America Corp (NYSE:BAC).
The Best IPOs to Buy for the Rest of 2017: Carvana
IPO Timetable: First half of 2017 (estimated)
Carvana wants to disrupt the traditional car dealership model.
Arizona-based Carvana operates an online platform where you can select a used car, which has already undergone an extensive certification process. You also can fill out a form to get an appraisal for a trade-in. And when you’re done, you can either have the vehicle delivered to you, or pick up your car at a local vending area. It even offers a seven-day, “no questions asked” money-back policy.
The savings are noteworthy, averaging about $1,500 per vehicle.
Carvana is growing like a weed, with revenues soaring from $140 million in 2015 to $350 million in 2016. And as operators like CarMax, Inc (NYSE:KMX) — which now sports a market capitalization of about $12 billion — have proven, the opportunity to change up the auto industry is massive.
The Best IPOs to Buy for the Rest of 2017: Dropbox
IPO Timetable: First half of 2017 (estimated)
Now that Snap Inc has gone public, what tech unicorn will be the next to go public?
Right now, it’s hard to tell. There’s still a ton of venture capital sloshing around, as evidenced by Airbnb, which recently snagged a cool $1 billion in a funding round. (On a very related note, don’t expect an Airbnb IPO anytime soon.)
But the decision to go public is about more than just money. There are other advantages, such as providing more transparency, allowing employees to cash out of their options and using company stock as currency for mergers and acquisitions.
So what unicorn fits the bill?
Dropbox seems the next likely bet, but it does face a ton of competition from large operators that provide cloud-based file storage systems. This includes the likes of Apple Inc. (NASDAQ:AAPL), Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT) and Alphabet — well-heeled mega-caps that can buy their way to success.
Still, Dropbox has been quite nimble in this environment. The company surpassed 500 million signups last year, and revenues are expected to hit $1 billion in 2017. Better still, Dropbox should be cash flow-positive.
A key part of Dropbox’s success has been the launch of a business service that allows for secure collaboration. That has garnered about 200,000 customer sign-ups.
The Best IPOs to Buy for the Rest of 2017: Canada Goose
IPO Timetable: Week of March 13-17
Who says retail is dead?
Canada Goose got its start in Toronto back in 1957, with a focus on manufacturing woolen vests, raincoats and snowmobile suits. It was mostly a small business until about the 1990s, when the company expanded into overseas markets and began to offer luxury products.
In 2013, Canada Goose sold a majority of its shares to Bain Capital, which accelerated the company’s growth. Now, the company sports a valuation of about $1.5 billion.
The Canada Goose brand isn’t just luxury — it’s durability. According to the S-1:
“For decades, we have helped explorers, scientists, athletes and film crews embrace the elements in some of the harshest environments in the world. Our stories are real and are best told through the unfiltered lens of Goose People, our brand ambassadors. The journeys, achievements and attitudes of these incredible adventurers embody our core belief that greatness is out there and inspire our customers to chart their own course.”
The company’s financials are outstanding. From fiscal 2014 to 2016, the compound average growth rate of revenues was 38.3% ($290.8 million), and 85% for adjusted EBITDA ($54.3 million).
What’s more, Canada Goose has been investing heavily in its e-commerce efforts — which represent 11.4% of overall sales — and has begun rolling out retail locations in places like Toronto and New York City.
Tom Taulli runs the InvestorPlace blog IPO Playbook and is the author of various books, including Taxes 2017: Saving A Bundle. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.