Many investors know that 2021 was a record year for initial public offerings (IPOs) in the United States. Of course, last year brought a near-complete halt to this space, with many must-watch stocks slated for IPOs putting off their plans, waiting for higher prices to materialize.
As it happens, 2023 has brought those higher valuations. Accordingly, with many pockets of the market rallying (despite a challenging macro backdrop), some investors are looking to raise money right now, before this environment changes.
Here are three must-watch stocks for investors looking to ride this mini IPO boom higher.
Cava Group (CAVA)
Cava (NYSE:CAVA), a fast-casual Mediterranean restaurant chain, has experienced impressive growth, with revenue increasing from $45 million in 2016 to $564 million in 2022. It currently operates 263 locations, mainly on the eastern coast of the U.S. Each Cava location, averaging 2,500 square feet, generated $2.5 million in sales during Q1 2023. The company has achieved consistent annual same-store sales growth of more than 10%. Additionally, Cava sells its popular food products in grocery stores across the country.
The IPO market is alive and well, as demonstrated by the successful debut of Cava. On its first day of trading, CAVA stock surged more than 90%, doubling its value in earlier trading on its first day. This strong performance reflects the high investor enthusiasm surrounding the Mediterranean restaurant chain. Initially priced at $22 per share, the stock price reached an intraday high of $46.75, briefly surpassing a $5 billion valuation before retracing some gains.
The management team, led by CEO Brett Schulman, envisions a fourfold expansion of Cava’s store count to more than 1,000 in the next 10 years. This ambitious plan contradicts the challenges faced by the restaurant industry, particularly due to the adverse effects of the pandemic. If this momentum continues, stock prices could be poised for higher highs from here.
Acelyrin (SLRN)
Based in Agoura Hills, California, Acelyrin (NASDAQ:SLRN) has secured more than $500 million in private funding, including a $300 million Series C round in September 2022. The funds will be used to advance the Phase 3 development of izokibep for psoriatic arthritis (PsA) and axial spondyloarthritis (AxSpA). Acelyrin also plans to allocate resources to develop izokibep for hidradenitis suppurativa (HS) and uveitis, while exploring additional potential indications.
Acelyrin’s IPO is significant for biotech investors. This is mainly because the IPO market has been very sluggish for biotech stocks throughout the past year. Accordingly, given how acutely many companies in this sector rely on equity markets for funding, a slow release of IPOs isn’t a positive for this space. However, with stable interest rates and a potential decrease in market volatility, there is hope for increased activity in the IPO market. Many companies prefer not to go public during turbulent times, and the recent market volatility has affected the demand for public offerings.
Acelyrin aims to raise around $100 million through its offering, with the allocation of these funds towards clinical development yet to be determined. The company’s lead candidate drug, izokibep, shows promise. This makes it an attractive opportunity for investors. Additionally, Acelyrin’s pipeline includes other potential candidates, further enhancing its appeal.
Restaurant Brands (QSR)
Restaurant Brands (NYSE:QSR) is among the must-watch stocks benefiting from the recent IPO surge, but the company is actually one that’s almost a decade removed from its IPO. That said, this surge in valuations across the board has led to some impressive price action for companies looking to raise money. On a year-to-date basis alone, QSR stock is up more than 12% at the time of writing.
This move has also led to some intriguing opportunities for the company’s insiders to sell off a portion their holdings at these higher levels. Earlier this year, via a block trade, a subsidiary of owner 3G Capital Partners sold off $2 billion of QSR stock at a discount of approximately 4%, which is lower than the discount previously required by banks to sell large blocks of stock last year.
Typically, insider selling is a sign that things are getting frothy at a given company. However, considering the wide range QSR stock has traded in, some insiders may simply have viewed these higher prices as a way to lock in their returns, given Restaurant Brands’ strong long-term performance.
Currently, QSR stock appears to be fairly priced with a slight upside of 19.68% above its intrinsic value. This suggests that purchasing the stock at the current price would be reasonable. Furthermore, if the true value of the company is $61.30, there is minimal downside risk when the price aligns with its actual value.
Restaurant Brands is a promising investment option with a global presence, growth potential, and a focus on sustainability.
On the date of publication, Chris MacDonald 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.
