Editor’s note: This article was updated on Dec. 31. 2020, to correct Palantir’s price.
The current year has been active for the initial public offering (IPO) market. As a matter of fact, three of the ten biggest technology IPOs have happened in fiscal year 2020. That said, this includes the December 2020 IPOs of DoorDash (NYSE:DASH) and Airbnb (NASDAQ:ABNB). And they are some of the best IPOs of 2020.
That said, this column will discuss four IPOs of FY2020 that have surged. And in addition to rewarding investors in the current year, I believe that these stocks are also interesting from a medium to long-term investment horizon.
So, as we move towards the close of the year, let’s discuss these best IPOs of 2020:
- Snowflake (NYSE:SNOW)
- Palantir Technologies (NYSE:PLTR)
- Xpeng (NYSE:XPEV)
- QuantumScape Corporation (NYSE:QS)
Now, let’s dive in and take a closer look at each one.
Best IPOs of 2020: Snowflake (SNOW)
SNOW stock opened at $120 per share would be among the best IPOs of 2020. Currently, SNOW stock trades way higher at $307. And even after the big rally, I remain bullish on the stock for the coming year.
If we look at the company’s financial and business growth metrics, the reason for the surge will be clear. For FY2019, the company reported revenue of $97 million and revenue increased to $265 million by FY2020. Furthermore, for the third quarter of 2021, the company’s revenue was $160 million, an increase of 119% on a year-over-year basis.
Additionally, Snowflake reported 3,554 customers in Q3 2021, which represented an increase of 84% YOY. Another growth factor is that the company reported 89% of revenue from the Americas in Q3 2020. However, this figure fell to 86% as the company expands internationally with growth in EMEA and APAC.
Overall, with an ever-growing market for data cloud, Snowflake is well-positioned for multi-year growth. SNOW stock is therefore an attractive investment idea on corrections. It’s one of the IPOs of FY2020 that can be considered for exposure for the next few years.
Palantir Technologies (PLTR)
PLTR stock would also find a place in the list of best IPOs of 2020. The stock listed at $10, and climbed to more than $25 at this point.
Palantir Technologies is also on a high growth trajectory. For Q3 2020, the company reported revenue growth of 52% on a YOY basis. The company also turned profitable at operating level.
It’s worth noting that in December 2020, the company has announced contracts worth $190 million. Furthermore, as of Q3 2020, the company reported customer contracts with an average duration of 3.6 years. In turn, this provides clear cash flow visibility. And these factors have triggered sharp upside for PLTR stock.
However, Credit Suisse analyst Brad Zelnick recently opinioned that even with the company offering “a unique data analytics platform,” valuations are stretched. Given the broad market valuation, I would wait for some correction before considering any fresh exposure.
Coming back to the positives, the company’s Q3 2020 top-line growth was 52%. However, government segment revenue growth was 68% on a YOY basis. This is bullish as government contracts increase as a percentage of the total backlog.
Collectively, Palantir Technologies is also expanding in regions like Asia, Middle East and South America. Regional diversification is likely to yield results in the coming years. Thus, PLTR stock is worth keeping on the radar. The stock has already delivered stellar returns in FY2020, and the long-term outlook remains bright.
Best IPOs of 2020: Xpeng (XPEV)
XPEV stock is another noteworthy listing and among the best IPOs of 2020. XPEV stock was listed at just above $20 and skyrocketed to $72. However, the stock has witnessed correction after a massive rally and currently trades at $38. The correction has also been due to the follow-on public offering.
Besides being among the best IPOs of FY2020, XPEV stock is also an attractive investment for the coming years. The electric vehicle (EV) market in China is expect to grow at a strong pace in the coming years, and Xpeng is likely to be one of the beneficiaries.
For Q3 2020, the company reported 265.8% growth in vehicle deliveries on a YOY basis. The company has also guided for strong vehicle deliveries for the last quarter of FY2020. With planned expansion in Europe in the coming year, Xpeng is likely to remain on a high growth trajectory.
Additionally, as vehicle deliveries increase, the company’s vehicle level margin is also expected to grow. To put things into perspective, Deutsche Bank expects the company’s sales volume to grow by 110% in FY2021 to 53,500 units. Sales volume is expected to increase to 300,000 units by FY2025.
Given these projections, XPEV stock is likely to witness a multi-year bull-run. And thus, I would rate the stock among the best IPOs of 2020.
QuantumScape Corporation (QS)
Special Purpose Acquisition Companies (SPAC) IPOs have also been in limelight through FY2020. QS stock is among the best performing SPACs.
In August 2020, the stock was trading around $10 and it currently trades at $115. A correction from the highs is very likely, but QS stock is another name that worth keeping in the radar.
As an overview, the company is developing “solid-state lithium-metal batteries for use in electric vehicles.”
So, what’s the reason for the stock going ballistic?
Recently, the company released data “demonstrating that its technology addresses fundamental issues holding back widespread adoption of high-energy density solid-state batteries, including charge time (current density), cycle life, safety, and operating temperature.”
If solid-state lithium-metal batteries are indeed adopted in the coming years, the company is likely to be a value creator in the next decade. It’s also worth noting that Volkswagen is the largest shareholder in QuantumScape. Therefore, the company has a strong financial backing and a product that can be an industry game changer.
On the date of publication, Faisal Humayun did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modelling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.