Merrill Lynch Says These 2019 IPOs Are Red-Hot Buys Now

By Lee Jackson Published Feb 21, 7:25AM EST

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Merrill Lynch Says These 2019 IPOs Are Red-Hot Buys Now — © Wikimedia Commons

The first half of 2019 was something like 1999, as technology initial public offerings (IPOs) that made little or no money came out and rocketed higher. However, by the summer of last year, the glow had quickly worn off, and many of the deals retreated to much lower price levels. Reportedly, some of the top hedge funds were shorting these stocks as soon as they could last year, and now it appears that many of those same hedge funds could be piling into the shares.

We screened the Merrill Lynch research database looking for backdraft trade ideas on some of the companies that had wild price swings in 2019. We found five stocks that are rated Buy at the firm and whose companies offer stellar technologies and applications. While not suited for conservative accounts, these picks make sense for aggressive investors looking for solid ideas.

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Bill.com

This company has been the big winner since it made its debut late last year, and it has one of the most talked about product offerings. Bill.com Holdings Inc. (NYSE: BILL) is a cloud software provider of accounts payable and accounts receivable software integrated with payment processing services (automated clearinghouse, check writing, cross-border payments and virtual credit cards) to small and medium-sized businesses (SMB).

Bill.com software automates the payables cycle from purchase order to payment, as well as the accounts receivable process from shipping to payment. The company reported very strong fiscal second-quarter results with subscription transaction revenue upside of $1.7 million, and $3.1 million from variable transactions. The Merrill Lynch analysts feel that Bill.com should represent a core growth holding, given expected consolidation of SMB payables/payments industry.

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Merrill Lynch analysts recently raised the price target on the shares to $58 from $48. That compares with a Wall Street consensus price target last seen at $53.67. However, the shares have blown through both levels and closed on Thursday at $60.11 per share, down over 4% on the day.

CrowdStrike

Shares of this cybersecurity giant were almost cut in half and offer some tremendous value. CrowdStrike Holdings Inc. (NASDAQ: CRWD | CRWD Price Prediction) is a leader in the endpoint protection platform (EPP) market. EPP solutions help protect enterprises’ internet-connected devices from cyberattacks, and there is a market shift from signature-based on-premises solutions to cloud-based platforms that use machine learning.

CrowdStrike’s platform is one of the few 100% cloud-based architectures and is uniquely positioned to displace incumbents with its platform breadth, including advanced detection and remediation capabilities.

The company announced this week that it will deliver automated sensor deployment of CrowdStrike Falcon on Google Cloud Platform. The offering will be available with Google Cloud Operating System Configuration that automates software installation and simplifies resource management. With automated sensor deployment, joint customers can easily install the lightweight CrowdStrike Falcon sensor for new Compute Engine resources on Google Cloud.

The Merrill Lynch price target is a massive $86, while the consensus target is lower at $79.19. The last CrowdStrike stock trade on Thursday came in at $63.38, representing a retreat of 4% for the day.

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Fastly

Shares of this edge cloud computing company have been blistered and offer an incredible entry point as well. Fastly Inc. (NYSE: FSLY) is an emerging technology leader in the high-growth content delivery networking (CDN) market. CDN vendors deliver content for enterprises and media/content providers, charging per bandwidth delivered.

Fastly’s network architecture is a combination of best-of-breed hardware and a patented software stack based on open source protocols. This unique stack enables the company to immediately deliver content globally and provide differentiated edge compute services and programmability.

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The company just reported solid quarterly results, beating on the top and bottom lines, in addition to confirming forward guidance for next quarter and the year. Given the sideways trading for the past couple of months, shares could be ready to jump higher.

The $26 Merrill Lynch price target is in line with the $26.11 posted consensus target. Fastly stock was last seen trading at $24.59 on Thursday.

Ping

This is another cyber and data security company with a stock that has been shellacked since the IPO. Ping Identity Holding Corp. (NYSE: PING) is a leader in identity access and management. Its IAM 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 (IoT) and API management. Ping differentiates with a history of complex deployments across hybrid networks.

The Ping Intelligent Identity platform provides customers, employees, partners and, increasingly, IoT, with access to cloud, mobile, SaaS and on-premises applications and APIs, while also managing identity and profile data at scale. Over half of the Fortune 100 choose to use the company for the identity expertise, open standards leadership and partnership with companies including Microsoft and Amazon.

Merrill Lynch has set its price objective at $28.50. The consensus target price is $27.82, but the shares closed at $28.63 apiece, after rising almost 5% on Thursday.

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Uber

This is the highest-profile company in the 2019 IPO club, and it may be the most exciting idea of all. Uber Technologies Inc. (NYSE: UBER) is a mobility platform that services 63 countries, more than 750 ridesharing markets and over 500+ Eats markets, and nearly half of its core platform revenue is generated outside of the United States.

The company’s monthly average paying customers represent 1% to 2% of the world’s population on a monthly basis. For rides, Uber acts as a middleman, connecting riders with drivers. For Eats, the market is three-sided, connecting customers, restaurants and drivers. Uber also has an emerging freight business.

The stock was very disappointing out of the gate last year, and it was almost cut in half before rallying back almost to the original IPO price of $45.

Merrill Lynch has a $49 price target for the shares. The analysts’ consensus target is $48.42, and Uber stock ended trading most recently at $40.92 a share.

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Except possibly Bill.com, all these companies still offer aggressive accounts outstanding entry levels, and most have seen their lock-up period come and go. Note that it is often common for newly public 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.

About the Author Lee Jackson →

Lee Jackson has covered Wall Street analysts' equity and debt research and equity strategy daily for 24/7 Wall St. since 2012. His broad and diverse career, which included a stint as the creative services director at the NBC affiliate in Austin, Texas, gives him unique insight into the financial industry and world.

Lee Jackson's journey in the financial industry spans over 30 years, with nearly two decades as an institutional equity salesperson at Bear Stearns, Lehman Brothers, and Morgan Stanley. His career was marked by his presence on the sell side during pivotal Wall Street events, from the dot.com rise and bubble to the Long Term Capital Management debacle, 9/11, and the Great Recession of 2008. This is a testament to his resilience and adaptability in the face of market volatility.

Lee Jackson’s practical financial industry experience, acquired from a career at some of the biggest banks and brokerage firms, is complemented by a lifetime of writing on various platforms. This unique combination allows him to shed light on the intricacies and workings of Wall Street in a way that only someone with deep insider experience and knowledge can. Moreover, his extensive network across Wall Street continues to provide direct access for him and 24/7 Wall St., a privilege few firms enjoy.

Since 2012, Jackson’s work for 24/7 Wall St. has been featured in Barron’s, Yahoo Finance, MarketWatch, Business Insider, TradingView, Real Money, The Street, Seeking Alpha, Benzinga, and other media outlets. He attended the prestigious Cranbrook Schools in Bloomfield Hills, Michigan, and has a degree in broadcasting from the Specs Howard School of Media Arts.