Since its IPO in the summer of 2015, AppFolio Inc (NASDAQ:APPF) has been on a tear, up nearly 200%. What’s more, almost every quarter since then, APPF stock has seen earnings and revenue grow, which for a young company is a very encouraging sign.
Better yet, since it does all its business in a relatively little-known niche, its IPO and subsequent maturation hasn’t caught the skeptical eye of many on Wall Street, so it has been able to go about its business without having to deal with analysts second guessing its business plan or acquisitions.
Technically, APPF stock has been around since 2006, focusing its initial business as a software as a service (SaaS) provider for property management companies.
Obviously, building a business on cloud-based property management software just before the biggest real estate crash in modern times may not have been the best time to launch. But it’s certainly one way to stress test your business model.
On the other side of the market crash, APPF looked to diversify its business without straying too far from its core competencies — a smart strategy, especially given the challenging business climate at the time.
In 2012, AppFolio bought MyCase Inc, a software management business for solo and small law firms.
By 2015, APPF stock continued to build out its model with the acquisition of RentLinx, a firm that specialized in getting property owners in front of the best quality rental candidates by syndicating rental listing to the best possible search websites.
And that’s pretty much the engine behind the entire company.
The Strength Behind APPF Stock
But that simple firm now has a market cap of $1.4 billion and its services are expanding across the U.S.
It’s important to remember that after the real estate crash in 2008, many of the Millennials that were just getting started in the work world saw what happened to the ‘dream of homeownership’ that their parents have lived by.
Mortgages were upside down, foreclosures skyrocketed and some of their parents had to dig into their retirement just to stay afloat.
That lesson hasn’t left the newest generation of potential U.S. homebuyers. Plus, with the staggering amount of student debt many of them are carrying, they don’t have the credit scores or down payment monies to sink into a home.
Add to that the fact that Millennials tend to be more interested in experiences rather than things, so spending money on an adventure is more attractive than buying a new water heater or getting furniture.
The point is, in an expanding renters’ market, APPF stock has a huge potential base that it hasn’t pierced the surface of yet. It’s also a very attractive acquisition target for a larger SaaS or cloud-focused firm at a healthy premium.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.