2020 is looking a whole lot like 1999, as technology initial public offerings that made little or no money came out and rocketed higher. However, some of the glow has worn off, and many of the deals went higher the first day of trading but then retreated to much lower price levels, or even traded lower right out of the chute. It was reported that some of the top hedge funds were shorting the IPOs as soon as they could, and now it appears that many of the same hedge funds could be piling into the shares.
We screened our 24/7 Wall St. research database looking for backdraft trade ideas on some of the companies that have had wild price swings in 2020. We found five companies that are rated Buy across Wall Street and that also offer stellar technologies and applications. While not suited for conservative accounts, they make sense for aggressive investors looking for solid ideas. While all five are rated Buy at major Wall Street firms, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Ping Identity
This company is at the forefront of cybersecurity and has awesome growth potential. Ping Identity Holding Corp. (NYSE: PING) is a leader in identity access and management. Its products safeguard enterprise applications and data by providing controls around user authentication, access and more.
Ping’s single-sign-on technology helps streamline user workflow by providing a single password for multiple applications to reduce log-ins. Additional product features include consumer identity management, Internet of Things and application programming interface management. Ping differentiates with a history of complex deployments across hybrid networks.
Though Ping reported better than anticipated second-quarter results, third-quarter guidance was weaker than expected. Management sees no change in terms of market health and competitive dynamics but cited pressure on larger deals and duration. COVID-19 related headwinds have an impact on near-term growth and visibility, but most on Wall Street expect a strong recovery in 2021.
BTIG has the highest target price, $37, on Wall Street. The consensus target is $35.73, and the shares closed trading on Tuesday at $36.37, up over 5% on the day.
Rackspace Technology
This company has returned to the publicly traded markets after a stint in private equity land. Rackspace Technology Inc. (NASDAQ: RXT) engages in the provision of end-to-end multicloud technology services. The firm designs, builds and operates its customers’ cloud environments across technology platforms.
Earlier this week, Rackspace reported a better than expected adjusted profit for its second quarter that ended June 30, while revenue grew 9% year over year to $657 million, also exceeding expectations.
Looking forward, the company projects adjusted fiscal year 2020 net income between $0.75 to $0.81 per share and consolidated revenue growth in a range of 9% to 10%, or about $2.66 billion to $2.68 billion based on its $2.44 billion in fiscal year 2019 revenue. Estimates across Wall Street are at $0.77 per share, excluding one-time items, on $2.64 billion in revenue.
Goldman Sachs has a gigantic $44 price target. While no consensus target is posted yet, as the company just reported, most targets across Wall Street are in the mid to high $20s. Shares closed at $21 on Tuesday.
Rocket Companies
The massive surge in mortgage demand and interest in refinancing is huge for this sector leader. Rocket Companies Inc. (NYSE: RKT) engages in the mortgage business in the United States. It is involved in originating, processing, underwriting and servicing predominantly government-sponsored enterprise-conforming mortgage loans, as well as Fair Housing Act, U.S. Department of Agriculture and U.S. Department of Veteran’s Affairs mortgage loans.
The company offers its mortgage loans in 50 states through the internet, national television and other marketing channels. It also offers title insurance, property valuation and settlement services; online marketing and lead generation services; online-based personal loans; and car sales support services to car rental and online car purchasing platforms.
Rocket Companies also operates a digital platform for buying and selling homes; a sales and support platform that offers inbound and outbound contact center services; and a loan origination platform.
Citigroup has the highest price target at $35, while the consensus target is $28. The shares were last seen trading at $30.71, up almost 10% on Tuesday.
Royalty Pharma
This is a solid idea for more conservative investors looking at recent IPO action. Royalty Pharma PLC. (NASDAQ: RPRX) operates as a buyer of biopharmaceutical royalties and a funder of innovation in the biopharmaceutical industry. The company engages in the identification, evaluation and acquisition of attractive royalties and royalty-related assets on various biopharmaceutical therapies. It collaborates with innovators from academic institutions, research hospitals, small and mid-cap biotechnology companies and pharmaceutical companies.
The company’s portfolio includes royalties on approximately 45 commercial products and four development-stage product candidates. It has royalties on various therapeutic areas and drug classes, including the following:
- Neulasta, Neupogen, Rituxan, Ibrance, Imbruvica, Trodelvy, Tazverik and Xtandi in oncology
- Lyrica in neuropathic pain
- Biktarvy, Genvoya, Prezista, Symtuza, Truvada and Atripla in HIV
- Humira, Remicade and Cimzia TNF inhibitors
- Kalydeco, Orkambi, Symdeko and Trikafta in cystic fibrosis
- Tecfidera and Tysabri in multiple sclerosis
- Emgality, Nurtec ODT and vazegepant in migraine
The $56 Truist Securities price target is a Wall Street high. The $52.21 consensus target is also well above the most recent close at $41.60 per share.
24/7 Wall St.Zoominfo Technologies
This company has backed up substantially since a red-hot start. Zoominfo Technologies Inc. (NASDAQ: ZI) operates a cloud-based go-to-market intelligence platform for information and insights on organizations and professionals in the United States and internationally.
The company’s platform helps sales and marketing professionals to identify the target customers, pinpoint the right decision-makers, obtain continually updated predictive lead and company scoring, monitor buying signals and other attributes of target companies, craft the right message, engage via automated sales tools, and track progress through the deal cycle.
Zoominfo customers operate in various industry verticals, including software, business services, manufacturing, telecommunications, financial services and insurance, retail, media and internet, transportation, education, hospitality, health care, and real estate, as well as global enterprises, mid-market companies and small and medium-sized business.
BofA Securities has a $60 price objective, which is tied for the highest on Wall Street. The consensus target is $53.79, and the last trade Tuesday hit the tape at $38.42.
All these recently public companies still offer aggressive investors outstanding entry levels, but most have not seen their lockup periods come and go. It is often common for new companies to price a secondary offering of additional shares six months to a year after the IPO, so traders may want to keep an eye out for those offerings.
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