IPOs Tell Us The Market Is Moving Higher

The IPO window is wide open, as a number of new stocks came to the market for the first time this week.  Today we have a few new names so let’s take a look at them which stocks are set to see new coverage next week.

8 IPO’s

One of the more successful deals this week was Floor & Decor Holdings (FND) which priced 8.82M shares at $21, well above the $16-$18 expected range.  The stock opened at $30.25 and has traded as high as $32.45.  The CEO appeared on new media and suggest a reason for the success for the company has been the money invested in stores.  This has helped the company compete with Home Depot (HD) and Amazon (AMZN).

Seeing far less action was Verona Pharma (VRNA) which increased the offering size from 4.45M to 5.77M shares and priced them at $13.50, a penny above the expected range.  Since the IPO yesterday, the stock has basically held serve right at $13.50.  I see only about 20K shares traded today, so this stock will likely remain rather thin.

Two Weaker Deals

Emerald Expositions Events (EEX) saw the expected range of 18-20 turn out to be a bit too much and they priced 15.5M shares at $17.  The stock opened at $18.73 and at the time of writing this it was trading at $19.29, up 2.29 for a 13% gain.  Despite the weak pricing, investors have decided to give this trade show company a chance.

Carvana (CVNA) is a platform for buying used cars, and they priced shares at the middle of the expected range of $14-$16.  While the 15M shares were sold at $15, they opened much softer at $13.71.  The stock continued to slide at I see it hitting a low of $12.50 on stiff volume of 7.5M shares. 

Head In The Clouds

It seems that cloud stocks just keep coming and today we have another one with an interesting valuation story.  Couldera (CLDR) priced 15M shares at $15, one dollar over the top of the expected range.  The stock opened at $17.86 and ran up to $19 and could be destined for a higher price or maybe even a deal down the road.

I make that speculation because the company saw a $766.5M investment from Intel back in 2014 at a valuation of just under $31 per share.  That means the $15 IPO price is a brutal beat down of more than 50% for the chip maker.  That said, could they be looking to buy the other 78% of the company they don’t already own?  At this price, it wouldn’t be surprising to see the company add to their position.

Shares of CLDR topped out around $19.33 today, but over the longer term this stock could one to watch.

Best of the Rest

NCS Multistage (NCSM) is in the oil patch, helping oil and natural gas well completions and will be a proxy for how 2 oil patch IPO’s will go next week. Those two deals are much bigger deals (AMPG and BDFC) and of course the price of oil will impact trading on all the names in the oil patch.

China Rapid (XRF) revised its range lower and could be a stock to avoid.  The company is a only one of the largest consumer lending marketplaces in China.  I don’t think I need to say too much more about this one.

Finally we have Zymeworks (ZYME) which was the smallest deal at 4.5M shares and they priced at the bottom end of the $13-$16 range.

New Coverage Coming

Next week I see four stocks that will be on their way to getting a Zacks Rank.  The Zacks Rank is focused on the movement of earnings estimates, so the new coverage will allow for the movement in the estimates that is crucial to the Rank. 

Three stocks will see new coverage on May 1, Elevate Credit (ELVT) which helps non-prime customers and we are hearing a lot about auto sub prime of late so this is a good topically name.

Hess Midstream (HESM) should see coverage as well from several very big brokers, Goldman Sachs and Morgan Stanley were among the 5 co leaders on the deal so look for coverage from all of them.

The trucking industry is red hot and recent IPO Schneider National (SNDR) could see a lot of new reports roll out with a buy rating.

Finally we have OKTA (OKTA) a could software company that has developed Identity Cloud which is used for connectivity and authentication.  I like this stock to move as the deal was pretty strong and the stock has been moving in the right direction since the IPO. 

Why This Is All Good In The ‘Hood

The stock market was stronger this week due to the French elections and the anticipation of Trump Tax reform. Lost in those bigger stories was the strong IPO market which means that the economy in general is likely to remain strong. 

Venture capital companies are seeing more exits and then putting more cash to work in new company’s.  This is a big part of the economic lifecycle, so seeing several strong IPOs this week is a good thing.

Four deals are slated to price next week, so the hits look to keep coming and that tells me the market is probably going to continue moving higher.

 

Brian Bolan is the Aggressive Growth Stock Strategist at Zacks Investment Research. You can follow his article by clicking the follow the author button above or find him on Twitter: BBolan1

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