3 Hot Tech IPOs You May Have Missed
Prior to Facebook’s disastrous initial public auction, “going public” had been viewed as a relatively glamorous step in a company’s lifecycle, at least in the eyes of the average market onlooker. Yet, an IPO is not a one-size-fits-all process that works for all private companies, as we’ve so passionately discussed before. Over the past month, there have been a few notable IPOs in the technology industry, though the blogosphere has not taken appropriate notice, as they’ve been dwarfed by the ongoing coverage of Zuckerberg & Co. Here are three companies that have began selling their shares on the secondary market; it may be wise to consider adding them to your portfolio.
ServiceNow (NYSE: NOW)
As a member of the cloud computing community (here’s our top stock picks), ServiceNow is operating in a promising industry, to say the least. Originally founded in 2003, shares of NOW began to be publicly traded late last month, priced at $18 a share. Nearly a full four weeks later and the stock has popped to the $25 range, and an earnings affirmation on August 1st will provide another boost. The company has seen its revenue quintuple over the past two years, riding strong growth in its IT customer base.
All in all, year-end revenues should surpass $140 million in 2012 after clocking in at $19.3 million in 2009. While it remains to be seen what EPS totals will look like, ServiceNow has been rather efficient post-recession, sporting operating (11.4%) and net (10.6%) margins way above the industry averages of 3.8 and 3.6 percent respectively. With price targets like these, it may be a good idea to take a position in this up-and-coming tech player.
Kayak Software (NASDAQ: KYAK)
Created by the cofounders of Expedia (NASDAQ: EXPE), Travelocity, and Orbitz (NYSE: OWW), Kayak is a travel search engine that aims at providing a more integrated online experience. Since its IPO last week, shares of KYAK have risen from their offering price of $26 to the $32 range. In the three years before going public, the company has grown its revenues at an average annual rate of 26.1 percent, above the likes of EXPE (5.5%) and OWW (-4.1%), and the industry average (9.3%).
By the end of 2012, analysts are expecting earnings between $0.60 and $0.85 a share, a large increase from the $0.26 it reported in 2011. If these estimates hold, fairly valued shares could vault into the $40 range, though the stock would still be expensive (~45.0X) in comparison to the Forward P/E’s of EXPE (12.7X) and OWW (9.4X). Interestingly, the company that Kayak relies on for its “faring engine” is ITA Software, which Google (NASDAQ: GOOG) bought last year. It remains to be seen how Google will handle this situation, but it could presumably send Kayak packing if it would like to enter this market. In the short-term, though, KYAK still looks like a good buy, as its contract with ITA Software is valid through December 31st, 2013. For updates on this situation, check back here.
Palo Alto Networks (NYSE: PANW)
Last but not least, Palo Alto Networks held its IPO last week; at an initial price between $34 and $37 a share. As shares of PANW have risen to flirt with $60, so have the expectations surrounding this IT network security company. As a leader in the next-gen firewall market, Palo Alto allows businesses, governments, and individuals to have a better understanding of the traffic coming in and out of their networks. The company more than doubled its revenues last year to $119 million, and is expecting to eclipse $250 million by the end of 2012. With a Price-to-Sales ratio of 14.8X, though, it looks as if the markets have already priced in this growth. WealthLift’s Sentiment Index does rate this stock as a strong buy, so it would be wise to watch for the company’s next earnings release later this fall.
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Disclosure: The author has no holdings in the stocks mentioned in this article and has no plans to initiate any positions within the next 72 hours. He does, however, have the intention of rating these stocks on WealthLift.com, a social media website where investment ideas are shared openly and free.