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3 Beaten-Down Tech IPOs

These stocks didn't have standout IPOs, but that means they're more attractively valued

By Tom Taulli, InvestorPlace Writer & IPO Playbook Editor

There was a lot to like about tech IPOs last year. Consider that 18 posted returns above 100%. Just some include tech stocks like Tableau Software (DATA), up 215%, and FireEye (FEYE), which gained 259%.

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The themes that attracted investors to tech IPOs were diverse: 3d printing, cloud computing, mobile apps, Big Data, ecommerce and security. The one thing all these segments have in common is that they continue to grow at a strong pace.

But what about the tech IPOs that have not performed so well? Might there be more opportunities?

I think so. So here are some to consider:

Control 4 (CTRL)

tech-ipos-ctrl-stockFounded in 2003, Control 4 (CTRL) is a provider of home automation solutions. For example, its system automatically manages the temperature of a home, and with the press of a button, it locks all the doors, arms the security system and powers down all non-essential devices. This is all done by using a smartphone, tablet or simple remote control.

Business has been growing nicely. For 2013, revenues increased by 17% to $128.5 million, and non-GAAP net income came to $8.4 million or 38 cents per share. The company sells its technology on a subscription basis.

Of course, the market got a big boost from Google’s (GOOG) recent acquisition of Nest for $3.2 billion. It was a validation of the home automation industry and fueled the rise in CTRL stock … temporarily. In fact, CTRL stock is off about 30% from its high. But keep in mind that CTRL is a partner with Nest. Both companies have been working to integrate their technologies.

At the same time, the rebound in the residential real estate market should also be a boost. To capitalize on this, the company has been aggressive in forming relationships with homebuilders, such as a recent deal with Toll Brothers (TOL).

But as the home automation market grows, it is likely that large players like Microsoft (MSFT), Cisco (CSCO) and AT&T (T) will want to get a piece of the action. So ultimately, CTRL may be pretty good buyout bait.

MiX Telematics (MIXT)

tech-ipos-mixt-stockWhile most cloud IPOs have been red hot, MiX Telematics (MIXT) has not participated in the rally. Since going public in August, the stock is off by 22%.

Perhaps part of the reason is that investors got too carried away with the potential for growth. But with the valuation reset, MIXT does look interesting. The stock is currently trading at 3 times sales. Yet it is common for other cloud operators to trade at multiples of 5 to 10.

MIXT operates a cloud platform that helps manage fleets, including services for monitoring, cost reductions and mitigation of theft. The reach is global as the company has operations in 112 countries and serves more than 4,000 fleets. Some of the customers include Bechtel, Chevron (CVX), Nestlé (NSRGY), PepsiCo (PEP), Rio Tinto (RIO) and Schlumberger (SLB).

MIXT has been moving to a subscription model, which partly explains the deceleration in revenues. For the long-term, this is the smart move because it will build a nice recurring base.  But it’s not easy to pull off.

So for the full-year, MIXT expects overall revenue growth of 8% to 11%. But the subscription component is forecast to ramp by 20% to 21%.

Going forward, the market opportunity is massive. Based on a report from ABI Research, there are move than 333 million commercial vehicles (as of 2012). But by the end of 2017, the number is expected to nearly triple. But only about 4% currently use some type of telematics solution.

Covisint (COVS)

tech-ipos-covs-stockCovisint (COVS) operates a cloud platform that helps organizations with secure collaboration, such as with partners, customers and suppliers. Some of the benefits include better revenue opportunities, improved customer retention and lower costs.

A key to Covisint is its integration. That is, the technology has hooks into old-line software solutions. This means that customers don’t have to rip out any technologies.

For the most part, the company has focused on three industries: automotive, healthcare and energy. Some of the customers include biggies like AT&T (T), Blue Cross Blue Shield Association and Daimler (DDAIF). But the company has plans to expand into other verticals, which can certainly help improve the growth.

Like MIXT, COVS is also in the midst of a shift in its business model to subscriptions. And it has yielded uneven results. That explains the recent drop in the stock price, which is off by 5% since its public offering in September.

But the encouraging news is that COVS posted subscription growth of 21% on a year-over-year basis in the latest quarter. The company is also getting traction with a partnership with Cisco. The partnership involves embedding COVS technology in the Cisco Exchange platform, which could ultimately mean a boost in the customer count.

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO StrategiesAll About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

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