My 2018 Top 3 IPO Watch List
January 17, 2018, 11:09 am
Initial Public Offerings (IPOs) can be one of the most exciting terms on Wall Street. The excitement of getting into a buzz-worthy company at the ground floor is enticing, and sometimes that approach pays off big. However, it’s also risky since you can’t always believe the hype.
2018 is poised to be a big year for IPOs after a somewhat mixed 2017, with several well-known names hitting the exchanges. I’ve spent a lot of time researching them and wanted to share three companies that are worth watching this year.
Hot IPO #1: Survey Monkey
This Silicon Valley cloud-based software company is the global leader in online polling and surveys that have become a critical tool for businesses. Whether it’s to gauge the popularity of a new product or solicit feedback from customers, Survey Monkey has the power to improve the efficiency and effectiveness of marketing by reaching the most important target demographics through email, chat, social media and other mediums.
I had been concerned that the company might stumble after founder Dave Goldberg died in 2015, but that has not been the case. The site boasts three million visitors every day, and generated more than $200 million in revenue last year with lucrative profit margins in the 30%-40% range. Survey Monkey has also had recent success in Australia, which will serve as a launch pad for the untapped Asia-Pacific market.
Hot IPO #2: Airbnb
Founded over nine years ago, chances are good you’ve either personally used or at least have heard about Airbnb. The global home rental service exploded onto the scene as an alternative way to secure lodging while traveling. Rather than book through an overpriced hotel, users can check out local homes, apartments and even house boats for their next adventure. Airbnb currently has more than four million listing in over 190 countries, and is working on launching a premium service to tap into the lucrative luxury and business traveler market. While some places like New York State now have laws restricting who can rent their homes out on this type of site, Airbnb has been able to work with local governments to craft mutually-beneficial legislation.
The company was originally expected to go public in 2015, but chose to remain private and has grown rapidly in the following two years. Profitable since 2016, management estimates they will earn more than $3 billion in revenue this year and over $8 billion by 2020. Now that the company is back on the IPO bandwagon, it’s certainly an interesting candidate to consider.
Hot IPO #3: Lyft
This ride-sharing service and its fellow competitor Uber have upended the taxi industry with cheaper and more convenient services. Lyft recruits drivers who use their own car and solicits customers through a smartphone app. Both have a lot of promise, and until recently Uber was the darling of investors and the most likely IPO candidate. But a string of scandals over the past year, including sexual harassment charges, feuds with municipalities and criminal investigations that prompted the CEO and other top executives to step down, has provided an opportunity for Lyft. Its ability to more effectively navigate the regulatory issues and pressures of a fast-growing business is one reason I give it a nod over Uber.
Lyft’s ridership surged in 2017, with gross bookings rising to $3.2 billion and its share of the U.S. market climbing from 16% to 22%. While it currently operates only in the United States, that gives is an edge since it has more room to grow. Plus, Lyft plans to expand into Canada and is moving aggressively to develop a fleet of self-driving cars. These are the kind of catalysts I like to see in a growth stock.