Despite a wave of companies scrapping or postponing initial public offerings this year, a few that have gone public are performing impressively well. My list includes three tech stocks, one airline, and one car-sharing business. But are they all good buys? I take a look at each of them below.
HomeAway, Inc. (AWAY) – This online network of websites that showcase vacation rental properties has a market capitalization of $2.72 billion. It is trading near $33 a share. Since going public in June, its closing price has ranged from $30.07 to $45.75, so it has not yet closed below its IPO price of $27 a share. Earnings per share is $0.07, and its price to earnings ratio is 457.03. AWAY’s five-year expected price/earnings-to-growth ratio is 1.77. Quarterly revenue for the period ended June 30, 2011 was almost $51 million, which is 40.90 percent over the same period 2010. AWAY is showing a loss of quarterly earnings 85.4 percent. It carries no debt.
Priceline.com Inc. (PCLN), a travel-related website that matches users with discount airline tickets, hotel stays and other services, is currently trading near $450. Its 52-week closing range is $325 to $561.88. Earnings per share is $14.10, and price to earnings ratio is 31.87. Price/earnings to growth ratio is 0.75. Quarterly revenue for the period June 30 was $1.1 billion. Quarterly revenue growth is 43.7 percent, and quarterly earnings growth is 123 percent. PCLN shows $575 million in debt and $1.95 billion in cash. Its market capitalization is $22.37 billion.
AWAY company officials expect total revenue to reach $57 to $58 million for the third quarter 2011, and current analyst estimates average $58.07 million. Barclays Capital has just initiated an “Equal Weight” rating. Management attributes the increase to strong renewal rates, new listings, and increased revenue per listings, adding that AWAY’s total growth is fueled by acquisitions of other online listing services, increased listings per property owner/manager, and increased revenue per listing from clients purchasing upgraded features.
New companies with limited operating histories pose risks. Management may not accurately evaluate current and future trends. The travel industry can be adversely impacted by broader economic slowdowns. AWAY’s performance numbers remain attractive, and it has tremendous growth potential. It is well managed. Most importantly, it is extremely well priced. AWAY is among my favorite new issues.
LinkedIn Corporation (LNKD) – Currently trading near $75, this online professional network went public at a price of $45 per share in May. Its closing price has ranged from a low of $60.14 to a high of $122.70 in the period since. Earnings per share is $0.18, and price to earnings ratio is 436.20. Its price/earnings-to-growth ratio is 30.42. Net revenue for the quarter ended June 30, 2011 was $121 million, which represents an increase of 120.50 percent over the same period in 2010. Quarterly earnings growth is 5.10 percent. It carries no debt and shows $372.1 million in cash.
Monster Worldwide, Inc. (MWW), an online employment service, is currently trading near $7.20 a share. Its 52-week range is $7 to $25.90. Earnings per share is $0.05, and price-to-earnings ratio is 138.08. Its price/earnings-to-growth ratio is 1.07. Quarterly revenue has increased to almost $270 million for the quarter ended June 30 from $215 million for the same period last year, up 25.50 percent. MWW carries $122.13 million in debt and shows $199.03 in cash. Its market capitalization is $881.92 million.
LNKD management remains committed to long-term growth through product development, through aggressive domestic and international marketing, by upgrading network infrastructure and technology, and by increasing its staff. However, management makes it clear that it does not expect to realize profits in 2011 despite its trend over the past six quarters. Barclays Capital initiated an “Overweight” rating on LNKD on Sept. 16. Analyst revenue estimates average $125.95 million for the third quarter of this year. Analyst growth estimates reach 1,066.70 percent for next year and 87.23 percent over the next five years.
LNKD recently hosted President Barack Obama’s Sept. 26 town hall meeting. Though industry professionals recognize that the publicity can’t hurt, questions remain whether LNKD can attract small business clients that are looking for workers, as well as the larger ones that are more equipped to pay over $100 to post a job for a month.
LNKD’s share price is a little high, but it has been on a general downswing for the past couple of months. Expected issues with profit margins could impact share price, but indicators point to future growth. I believe the most prudent way to purchase this stock is a little at a time.
Spirit Airlines, Inc. (SAVE) – This leisure travel airline that serves passengers in south Florida, the Caribbean, and Latin America is currently trading near $12.50 a share. Its initial offering price was $12. Its closing price since going public in May has fluctuated between $10.18 and $14.42. Earnings per share is $3.15, and price-to-earnings ratio is 3.96. Total operating revenue for the quarter ended June was $275.891 million, which was 55.6 percent over the same quarter 2010. SAVE carries no debt and has $248.46 million in cash. Market capitalization is $906.15 million.
AMR Corporation (AMR) provides jet service through its subsidiary American Airlines. It is currently trading at $2.96 a share and has fluctuated from $2.94 to $8.98 over the past year. It is showing a loss per share of $2.02. Its quarterly revenue growth is 7.80 percent. It carries $11.88 billion in debt and $5.18 billion in cash.
SAVE operates at a cost that is unusually low compared to its competitors and the industry average. This is good. Metrics that seem to point to growth may have been impacted by a hit to second quarter 2010 operating income by a pilot strike. The airline industry is notoriously vulnerable to fuel price fluctuations and broader market conditions, like the listless U.S. economy. SAVE is contracted to upgrade its current fleet of airplanes and purchase more, but revenue is estimated to continue increasing. One analyst initiated a “Buy” recommendation on SAVE in July, and other ratings trend toward “Strong Buys” and “Buys.”
Though I like its current price, I’m not convinced that SAVE is an investment for everyone. The fact that it is a new stock is compounded by risks inherent in its industry. Though I like that is debt free, future performance is contingent on too many unknowns, like fuel prices and possible recession. It can provide opportunities for experienced investors and options traders, though I would hold off on adding it to an income or more conservative foundation portfolio.
Zipcar, Inc. (ZIP) – This car sharing service is currently trading near its initial public offering price of $18. Since going public in April, it has fluctuated from $16.50 to $31.50. A lot of ZIP’s metrics are not available. According to its report for the quarter ended June 30, revenue has increased to $61.6 million from $46 million in the same period 2010, or 34 percent. Membership has increased by 29 percent, and membership retention is extremely high. Management expects strong third-quarter results. Revenue is estimated in the $67 million to $69 million range. Adjusted EBITDA is expected to fall between $3.5 million and $4.5 million. Company officials expect strong year-end results too.
Hertz Global Holdings Inc. (HTZ) is currently trading around $9 a share. Its 52-weeek closing range is $8.65 to $17.64. Total revenue has increased to almost $2.1 million for the quarter ended June 30 from $1.9 million for the same period in 2010. Other available metrics for HTZ include earnings per share of $0.12 and price to earnings ratio of 76.06. Market capitalization is $3.71 billion.
ZIP is definitely on the road to growth. Ford Motor Company (F) has partnered with ZIP to provide 1,000 SUVs and sedans over the next two years. Industry professionals see the agreement as an opportunity for ZIP to create a model for partnering with other car manufacturers, but it also means manufacturers may create their own sharing programs or are positioning to partner with ZIP’s competitors. ZIP engages in catchy public relations events, such as the "Low-Car Diet challenge," in which participants exchange personal vehicles with walking, biking, public transportation, and car-sharing rides.
It’s easy to get caught up in the coolness of this trendy new company. It carries risks since a lot of financial information is not yet available, so it should be added to already well-diversified portfolios. If its share price rises too much, it could lose its purchase appeal. I continue to like it, though. I like where it is currently trading. ZIP’s founders and management care about the impact their service has on the world around them. I like its socially conscious and catchy brand. Its story captures the essences of American entrepreneurism. It is the kind of company that people take pride in owning and supporting.
Responsys, Inc. (MKTG) – This online and mobile marketing provider is currently trading near $10.50. Its initial offering price from April was $12. It has fluctuated from $10 to $18.19 since going public. Earnings per share is $0.19, and price to earnings ratio is 54.33. Quarterly revenue has increased 56 percent, and quarterly earnings have increased 52.7 percent. It carries $2.56 million in debt and shows $84.4 million in cash. Market capitalization is $470.02 million.
Its competitor ValueClick, Inc. VCLK is currently trading near $15.75, which is in the middle of its 52-week range of $12.61 to $19.73. Earnings per share is $1.12, and price-to-earnings ratio is 14.01. Quarterly revenue growth is 25.6 percent, and quarterly earnings growth is 41 percent. Market capitalization is $1.25 billion. VCLK carries no debt. Total cash is $142.53 million.
MKTG’s customer base includes finance, travel and retail businesses. Online marketing avenues have the highest advertising returns on investment, and this positions the company for navigating today’s uncertain markets. This bodes well for the company’s short- and medium-term growth too. Analyst recommendations trend toward “Strong Buy” and “Buy.” Revenue is expected to increase next quarter over the current quarter as well as next year. MKTG is also a strong candidate as an addition to well-diversified portfolios. Though competition is stiff, it remains well priced for now, and its growth prospects continue to look bright.