A Post-IPO Rally for Ruckus Wireless

by Tom Taulli | December 28, 2012 12:55 pm

When Ruckus Wireless (NYSE:RKUS[1]) came public in mid-November, investors were not interested. The shares plunged 18.3% on its first day of trading.

But it actually turned out to be a huge opportunity. Since the public offering, RKUS has surged about 84%.

So why the big miss? Keep in mind that the IPO market can get easily fidgety, especially when the general market is in a tailspin. And this was the case when Ruckus pulled off its IPO. At the time, the markets were falling in the wake of the Presidential election.

But for investors with a long-term view, it was certainly worth taking the time to read Ruckus’ S-1. You would have noticed that the company — which is a top gear maker for Wi-Fi installations — had a strong track record of growth. For the first nine months of 2012, revenues nearly doubled to $152.5 million, and earnings went from breakeven to a profit of $7.4 million.

The S-1 also had a great section called “Industry Background.” In it, Ruckus pointed out that devices running on Apple‘s (NASDAQ:AAPL[2]) iOS 6 and Google‘s (NASDAQ:GOOG[3]) Android were driving hyper growth in Wi-Fi. It also mentioned a study from Infonetics Research, which had a forecast showing the market going from $296 million in 2011 to $2.8 billion in 2016. That’s a sizzling 57% compound annual growth rate.

Still, going forward investors may want to temper things their sentiment. Consider that Lazard (NYSE:LAZ[4]) analyst Ryan Hutchinson has a price target on the stock of $23[5]. Ruckus is currently trading at $22.50.

But the main lesson here is that whenever the general market swoons, that may be an opportunity to pick up a hot IPO at a cheap valuation.

Tom Taulli runs the InvestorPlace blog IPO Playbook[6], a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of “How to Create the Next Facebook[7]” and “High-Profit IPO Strategies: Finding Breakout IPOs for Investors and Traders[8].”  Follow him on Twitter at @ttaulli[9]. As of this writing, he did not hold a position in any of the aforementioned securities.

  1. RKUS: http://studio-5.financialcontent.com/investplace/quote?Symbol=RKUS
  2. AAPL: http://studio-5.financialcontent.com/investplace/quote?Symbol=AAPL
  3. GOOG: http://studio-5.financialcontent.com/investplace/quote?Symbol=GOOG
  4. LAZ: http://studio-5.financialcontent.com/investplace/quote?Symbol=LAZ
  5. price target on the stock of $23: https://investorplace.com/ipo-playbook/ruckus-wireless-comes-back-from-the-dead/
  6. IPO Playbook: https://investorplace.com/ipo-playbook/
  7. How to Create the Next Facebook: http://www.amazon.com/gp/product/1430246472/ref=s9_simh_gw_p14_d0_i1?pf_rd_m=ATVPDKIKX0DER&pf_rd_s=center-3&pf_rd_r=0GRB6ZMCTYDZVNG7Q7NV&pf_rd_t=101&pf_rd_p=470938811&pf_rd_i=507846
  8. High-Profit IPO Strategies: Finding Breakout IPOs for Investors and Traders: http://goo.gl/pR2F3
  9. @ttaulli: https://twitter.com/ttaulli

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