Tech IPOs: Who Burnt Wealth and Who Gained Value?

In 2019, several high-profile tech IPOs made their debut in public markets. But it’s the lesser-known ones that are making a mark and increasing investor optimism. Let’s have a look at how recent tech IPOs have performed and what’s in store for them as we head towards 2020.

These big tech IPOs burnt investor wealth

Lyft (LYFT) stock publicly listed in April. It priced its initial public offering at $72 per share. The stock is currently trading at $42, which is 42% below its IPO price. Also, Lyft is trading 52% below its record high of $88.6.

Uber (UBER) stock went public in May 2019. It priced its IPO at $45 per share. Though Uber stock rose to $47.08, it is currently trading at $26.3. This is 40% below its IPO price. Also, there are growing concerns over the profitability of these multi-billion dollar transit companies.

Uber and Lyft are still posting huge losses despite strong growth in sales. While some might argue that it’s all about capturing market share at this stage, at what point will these companies improve operating leverage?

Other high-profile tech IPOs, such as Pinterest (PINT) and Slack (WORK), went public in April and June, respectively. Currently, Pinterest is trading at $20, which is just above its IPO price of $19. Slack is trading at $20.1, which is 23% below its IPO price of $26.

fitness-tech IPO Peloton went public in September at $29 per share and is trading at $23.1.

These tech IPOs gained market value

While there are several tech IPOs trading below their listing price, others managed to make positive returns. CrowdStrike (CRWD) went public in June at a listing price of $34 and the stock is trading at $45.72.

Also, Zoom Video (ZM) stock is trading at $69.13, which is 92% higher than its IPO price. Datadog (DDOG) stock is trading at $32.7 which is 21% above its IPO price of $27. Tradeweb Markets is trading at $42.26, which is 149% above the listing price of $17. This makes it one of the most successful IPOs in 2019.

IPOs are volatile. They are met with high optimism driven by high growth metrics and estimates. However, like every public company, they come under scrutiny after quarterly results.

In case tech IPOs miss analyst earnings or provide guidance that is not in line with Wall Street estimates, these stocks lose significant value due to their high valuations. Also, these stocks are vulnerable in a market sell-off.

While CRWD is trading above its IPO price, the stock has lost 55% in market value since August 2019. Similarly Zoom Video stock is trading 35% below its record high of $107.34.

A look at valuation and upside potential for tech IPOs

While tech IPOs continue to be volatile, let’s have a look at the stock valuations and compare them with a consensus target price.

Analysts value Uber stock at $45.6 billion or 3.23x forward sales. Its earnings are estimated to improve from -$6.52 in 2019 to -$2.41 per share in 2020. It has a price-to-sales ratio of 3.5x and a price-to-book ratio of 3x. Also, Uber’s EV/EBITDA is -5.2x. Analysts tracking Uber have a 12-month average target price of $45. This is 68% above the current trading price.

Also, analysts value Lyft stock at $12.6 billion or 3.5x forward sales. Its earnings are estimated to improve from -$11.71 in 2019 to -$4.92 per share in 2020. It has a price-to-sales ratio of 3.9x and a price-to-book ratio of 4.2x. The tech IPO’s EV/EBITDA is -4.1x. Analysts tracking Lyft have a 12-month average target price of $67, which is 58% above the current trading price.

Analysts value Slack stock at $10.84 billion or 17.8x forward sales. Its earnings are estimated to improve from -$0.4 in 2019 to -$0.24 per share in 2020. It has a price-to-sales ratio of 21.4x and a price-to-book ratio of 14.8x. Also, Slack’s EV/EBITDA is -23.5x. Analysts tracking tech IPO Slack have a 12-month average target price of $31.25. This is 56% above the current trading price.

Zoom Video and CRWD have big upside potential

Additionally, analysts value Datadog stock at $9.75 billion or 29.5x forward sales. Its earnings are estimated to improve from -$0.3 in 2019 to -$0.15 per share in 2020. It has a price-to-sales ratio of 36.6x. The tech IPO’s EV/EBITDA is -65.2x. Analysts tracking Datadog have a 12-month average target price of $40, which is 20.4% above the current trading price.

Analysts also value Zoom Video stock at $19.2 billion or 32.6x forward sales. It has a price-to-sales ratio of 41.3x and a price-to-book ratio of 25.7x. Also, ZM’s EV/EBITDA is 928.8x. Analysts tracking Zoom have a 12-month average target price of $91.8, which is 31% above the current trading price.

Analysts value CRWD stock at $10.46 billion or 23.2x forward sales. Its earnings are estimated to improve from -$0.63 in 2020 to -$0.35 per share in 2021. It has a price-to-sales ratio of 3.5x and a price-to-book ratio of 3x. CRWD’s EV/EBITDA is -74.9x. Analysts tracking tech IPO CRWD have a 12-month average target price of $84. Additionally, this is 81% above the current trading price.

We can see that tech IPOs tend to trade at premium valuations due to their high growth metrics. Also, analysts are still bullish on most tech IPOs. Will they make significant returns over the long-term?