The initial public offering (IPO) has quickly gone out of style. Last year and much of this year is dedicated to the SPAC, otherwise known as a special purpose acquisition company. These obscure investment vehicles stole a lot of thunder from IPOs last year, becoming the new hot stocks to buy.
However, you should not write off the traditional IPO just yet. A host of companies plan on tapping Wall Street for much-needed capital through this route. In the year thus far, we have seen the debut of female-led dating app operator Bumble (NASDAQ:BMBL), online gaming platform Roblox (NYSE:RBLX), and online education provider Coursera (NYSE:COUR). All these companies got an amazing response from investors.
Looking ahead, there are several exciting companies that are debuting within the near future. However, there are themes that are running through this list that are concurrent with the general state of our economy. For example, there are several new stocks to buy on this list that are from the technology-sector IPO market.
And it makes sense.
All through the pandemic, the tech sector did well. So, your money is the safest in this sector. Whether it is cloud computing, analytics, or artificial intelligence. Whenever there is an innovative tech company involved, you are sure to see consistently excellent returns. So, with that in mind, let us take a look at five IPOs that you should keep an eye on.
- The Fresh Market
New Stocks to Buy: The Fresh Market
The Fresh Market is a chain of gourmet supermarkets headquartered in Greensboro, North Carolina. In March 2016, the company inked an agreement to be acquired by private equity giant Apollo Global Management (NYSE:APO) in a $1.36 billion cash buyout. Bottom line, the grocer could not compete with the likes of Kroger (NYSE:KR) and Whole Foods.
However, one must give credit where it’s due, The Fresh Market has done really well in the last few years. The only area of concern is a high level of debt. Other than that, the company looks set to have a nice debut later this quarter.
You could be thinking this is just an easy way for Apollo to cash out on its investment. However, there is more to the company.
Moody’s (NYSE:MCO) said the grocer managed to increase 2020 sales by an estimated 20% due to investments in price, perishables, and expanding the availability of home delivery and pickup service.
The credit rating agency estimates the grocer had $187 million in unrestricted cash as of late October and it will be cash-flow positive for the remainder of this year.
“Fresh Market’s topline and EBITDA has demonstrated an improving trend since 2019 and got a further boost from pantry loading during the pandemic as consumers increased transaction sizes while lowering the number of trips to the store,” Moody’s Vice President Mickey Chadha said in a note.
All things considered, watch out for this company when it debuts later this quarter.
NerdWallet is a personal finance company. Tim Chen and Jacob Gibson founded NerdWallet during the Great Recession in 2009.
It offers financial guidance to users on credit cards, loans, mortgages and other financial products and services. The company gets more than 100 million users every year on its personal finance website and mobile phone app.
NerdWallet founders started off with an insignificant $800. However, it has grown to the point where it generates over $150 million in annual revenues.
Notably, over the past year, NerdWallet has been aggressive in terms of acquisitions. In September, the company acquired Know Your Money, a UK-based startup founded in Norwich in 2004 that offers comparisons on financial products. Then, in November, NerdWallet purchased small business loan marketplace New York City-based Fundera.
NerdWallet has tapped Morgan Stanley (NYSE:MS) to manage its IPO and is aiming to go public before the end of the year.
New Stocks to Buy: Robinhood
The pièce de résistance of IPOs this year has to be financial services company Robinhood, which has completely changed the way the average Joe trades stocks.
It was founded in 2013. At that point, people didn’t think much of the company’s application. The concept was not novel. Plus, there were plenty of online brokerage houses that performed the same function as Robinhood.
However, Robinhood takes top marks for functionality and innovation. The combination of an easy-to-use app, zero-commission trades, and no minimums for cash accounts, has led to the company aggressively taking away market share from larger competitors.
But no one could have foreseen what happened during the novel coronavirus pandemic. After stocks plummeted to a multi-year low back in April 2020, investors felt it was the perfect time to snap up shares at a discount.
In addition, there was a lot of stimulus money to go around. This led to a surge in usage, with up to 13 million users in 2020.
The only problem that Robinhood is facing is on the regulatory front. Due to millennial traders and Reddit users, we are seeing some astronomical valuations for companies like GameStop (NYSE:GME) and AMC Entertainment (NYSE:AMC), to name a few. But Robinhood is a brokerage disruptor. The kind that you need in your portfolio.
Nextdoor was co-founded by Sarah Leary, Nirav Tolia, Prakash Janakiraman, and David Wiesen in 2008 as a social network for your neighborhood. The platform is useful for making connections in your neighborhood, sending out or receiving recommendations and referrals, organizing events, posting alerts, and selling items.
Nextdoor covers roughly a quarter of U.S. households, so there is a lot of markets left where it can expand. But it has a sizeable presence and in 11 countries across 268,000 neighborhoods.
It is also led by ace management. Sarah Friar, previously CFO of Square (NYSE:SQ) when that company came public, became CEO of Nextdoor in late 2018. She has also served as an executive at Salesforce.com (NYSE:CRM) and a top software analyst at Goldman Sachs (NYSE:GS). It is quite the coup for the social networking service for neighborhoods.
Nextdoor, which has raised $470 million since its founding, has not confirmed a date to go public as of yet. In October 2020, Bloomberg reported the company was considering multiple IPO options and planning to go public in 2021.
New Stocks to Buy: Databricks
Databricks is an enterprise software company founded by the original creators of Apache Spark. Over the last several years, it has amassed a customer base of more than 5,000, including CVS Health (NYSE:CVS), Comcast (NASDAQ:CMCSA), Condé Nast and Nationwide.
In early February, the company closed on its latest funding round, netting $1 billion. That brings the total amount raised since inception to close to $2 billion. According to the latest funding round, Databricks was valued at $28 billion, with investors including Amazon (NASDAQ:AMZN) subsidiary Amazon Web Services, Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) backed CapitalG and Salesforce Ventures.
In an interview with CNBC, Databricks CEO Ali Ghodsi said the company might take a more non-traditional route to a public offering through a direct listing and that a public listing is likely this year.
On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.