Too many of 2017’s initial public offerings, to be blunt, have been downright disasters.
Snap Inc (NYSE:SNAP), the parent company of Snapchat, comes to mind. The clever photo-sharing app is fun to be sure, but not exactly sticky enough to attract an increasing number of users or advertisers. There’s also the not-so-small matter of Facebook Inc (NASDAQ:FB) more or less doing the same thing Snapchat does through its Instagram platform.
SNAP stock is down 23% from its February IPO price, though it has been more than cut in half from its March high.
Then there’s Blue Apron Holdings Inc (NYSE:APRN), which was issued at $10 per share back in June, looking to capitalize on the pre-packaged meal kit craze. As it turns out though, Amazon.com, Inc. (NASDAQ:AMZN) wants to get into the same business, revealing in July that it too was selling meal kits. It’s tough for any company to survive head-to-head competition with the king of e-commerce.
The year hasn’t been a trainwreck for all newly public companies though … just a few too many of the highest-profile ones. A closer look at some of the lesser-touted IPOs we’ve seen this year highlights some strong performers with equally strong growth prospects. Here’s a run-down of 2017’s more promising new stocks, many of which you may have never even heard of.
Best New Stocks: Funko (FNKO)
You know the company even if you don’t know the company.
Ever seen the oddly shaped, large-headed, cartoonized movie and TV show characters in stores like FYE or the toy aisles at Wal-Mart sold under a “Pop!” label? They’re made by Funko Inc (NASDAQ:FNKO). That’s hardly the only thing the company makes or licenses, however. More conventional toys as well as a wide array of apparel are also part of the revenue mix.
The stock isn’t off to a great start, down 31% from its early November IPO price of $12. Give it some time though. Goldman Sachs analyst Michael Ng thinks FNKO shares are going to be worth $16 apiece sooner or later, which is twice their current price.
Best New Stocks: Sienna Biopharmaceuticals (SNNA)
Just for the record, Sienna Biopharmaceuticals Inc (NASDAQ:SNNA) is a pre-revenue company, so is a speculative trade at best until further notice. Yet, the 28% gain it has logged since going public in July makes it clear that the underlying story — for the time being anyway — is enough to push the stock in a bullish direction.
Sienna Biopharmaceuticals is the developer of SNA-120 (or pegcantratinib), which is being tested as a treatment for psoriasis and itching associated with the condition. It’s not exactly a heavy-duty opportunity, but all things are relative.
To that end, the pros still like the relative opportunity quite a bit, and expect SNNA stock to continue edging higher. Analysts set price targets ranging from $28 to $50 per share back in August, versus the present price of $19.85.
Best New Stocks: Gardner Denver Holdings (GDI)
Gardner Denver Holdings Inc (NYSE:GDI) may well be the least interesting name of the 10 new IPO picks under the microscope today, but sometimes, boring can be beautiful.
The organization makes flow control solutions, which is a fancy word for fans, blowers, compressors and pumps. Most factories and plants need them, though few investors or consumers ever even think about them. It’s not exactly a high-growth business, but it’s a reliable-growth business. And the company has indeed been growing.
This year’s top line is on pace to improve by 11%, and though that growth should slow next year, the bottom line is expected to improve by 44% next year. Last quarter’s revenue jumped 40% year-over-year.
Gardner Denver Holdings was taken public by private equity firm KKR back in May, and has rallied 56% since then. That move means the stock’s trading at a rich forward-looking earnings multiple of 48.4, but it may well be worth it.
Best New Stocks: Canada Goose Holdings (GOOS)
Note that Canada Goose Holdings Inc. (NYSE:GOOS) is listed on the New York Stock Exchange as well as the Toronto Stock Exchange. It’s the same company though, which makes luxury apparel.
It won’t come cheap, should you choose to step in. The 114% gain GOOS shares have logged since going public in March translate into a trailing P/E of 148 and a still-frothy forward-looking P/E of 46.6. The underlying growth story is a good one though, with revenues projected to improve nearly 28% this year, while per-share profits are projected to rise to the tune of 35%.
It works because, while other retailers are struggling to lure people into their existing stores, Canada Goose knows exactly how to cater to the more affluent shopper online, and is being built from the ground up to sell directly to consumers … where margins are higher.
Best New Stocks: National Vision Holdings (EYE)
Earlier this month, Jefferies analyst Daniel Binder initiated coverage of a relatively new National Vision Holdings Inc (NASDAQ:EYE) stock, citing eight very specific reasons EYE should be worth $36 per share in the foreseeable future. Among them were an otherwise-fragmented eyewear and eyeglasses market, reliable profit growth and relatively low costs. He was right on all counts, at least judging from the 36% gain we’ve seen from the stock since it issued in late October.
As of the latest look, the pros are modeling a 24% increase in 2018’s bottom line, fueled by a 10% improvement in sales for 2018.
Best New Stocks: Hamilton Lane (HLNE)
Truth be told, shares of all-things-investment-related firm Hamilton Lane Inc (NASDAQ:HLNE) could probably do with a sizeable pullback after more than doubling since going public back in March.
It’s one of those names, however, has been willing and able to fall — and stay — in love with. HLNE shares are up more than 40% just since September, and the buyers haven’t looked back.
Of course, why would they? Analysts collectively expect per-share profits to grow from last year’s 91 cents to $1.14 this year to $1.38 per share next year, on the back of two years of double-digit revenue growth. This company went public just as its results were hitting full stride.
Best New Stocks: Despegar.com (DESP)
Don’t sweat it if you’ve never heard of Despegar Com Inc (NYSE:DESP). Unless you live in Latin America, you probably wouldn’t have heard of the funnily-named company. That doesn’t mean it can’t prove rewarding for U.S.-based investors though.
In simplest terms, Despegar is an online travel agent, based in Argentina and serving the region. It hasn’t been the healthiest of areas of late, in terms of economic growth. Severe political and economic turbulence in Brazil has certainly imposed a ripple effect on surrounding countries and trade partners.
The worst is in the rear-view mirror though, prompting bullishness from KeyBanc analyst Brad Erickson. He justified his $40 price target for DESP saying, “While the opportunity for online travel growth is fairly obvious after viewing Latin America’s relative underpenetration, more interesting to us is the comparison to other online travel agents’ relative market size, market share and market cap.”
Almost as if on cue, the company reported a 32% increase in Q3’s booking just a few days later, backed by 24% growth in revenues.
DESP is only up 4% since its September IPO, but the stage is set for growth.
Best New Stocks: Yext (YEXT)
Yext Inc (NYSE:YEXT) hasn’t exactly been a jaw-dropping winner since its April 13 IPO, though the 25% advance between then and now is certainly respectable. More important, more gains may well be on the way.
Yext is one of those new-age service providers that provides solutions most companies don’t even realize they had. It not only helps organizations with websites be found by consumers, it helps clients manage how consumers see those clients from one platform to another.
Sales growth hasn’t been a problem. The challenge has been ever-widening losses. A closer inspection of Yext’s recent quarters, though, reveals there may finally be enough scale here to start shrinking the loss. Fanning the flames of progress, according to KeyBanc Capital Markets analysts, is Yext’s impressive voice-based search technology and the underlying artificial intelligence that powers it.
Best New Stocks: Alteryx (AYX)
While the advent of cloud computing and a number of new ways of collecting digital data holds great promise for businesses, there’s a hitch — analyzing all those billions of data nuggets and turning them into useful information requires new tools.
Enter Alteryx Inc (NYSE:AYX), which (in the company’s own words) is a “leader in the self-service data analytics movement with a platform that can prep, blend, and analyze all of your data, then deploy and share analytics at scale for deeper insights in hours, not the weeks that you may be used to.”
Its IPO materialized on March 24, and the stock has advanced 94% in the meantime.
That’s a mighty big move for the stock of a company that’s not yet profitable. If you take a look at Alteryx’s revenue and income trajectory though — sales are projected to grow 36% next year — you’ll see a swing to a profit isn’t too far off. That’s why six of the seven analysts following AYX deem it a “buy” or a “strong buy,” with most of them making their call the day of the IPO.
Best New Stocks: Switch Inc (SWCH)
Finally, put Switch Inc (NYSE:SWCH) on your radar, as it’s another name that has already impressed several analysts in just a short period of time. Case(s) in point: Wells Fargo analyst Jennifer Fritzsche commented “As Switch expands its geographic reach across multiple markets, we expect it to generate the highest top-line growth of any data center operator we cover over the next 5 years,” while JP Morgan’s analysts noted “We believe Switch provides a premium data center product at a value price.”
Investors haven’t been quite as enthused about the developer of so-called “hyperscale” data center management platforms; the stock is only up about 4% since its early October IPO. Between steady revenue growth and a long history of real GAAP profits though, SWCH is a plenty-respectable possibility.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.
