The initial public offering (IPO) market has been dormant for much of this year but came alive recently with some super-hot tech deals that featured true Unicorn type opportunities for investors. They shot out of the gate and, with reasonably thin floats, took off higher, and with good reason. All three have outstanding business models and products, and they are among the leaders in their respective industries.
Most importantly for traders, all three have been hit hard and are down at levels that could offer a huge bounce back. In addition, top Wall Street analysts love these stocks, and needless to say, certainly will defend them as they back up. While only suitable for very aggressive accounts, they could be home runs if played right.
This had a red-hot IPO and has backed up huge since making a recent secondary offer. Acacia Communications Inc. (NASDAQ: ACIA) is a leading supplier of high-speed coherent optical interconnect products to network equipment manufacturers, hyperscale cloud companies and service providers. The company’s foundation is in its Digital Signal Processing (DSP), and a unique approach with its silicon-based photonic integrated circuit (PIC). The company primarily combines the DSP and PIC to create modules, which are integrated into optical/networking equipment to provide high-speed optical interconnect.
Top Wall Street analysts have increased estimates following Acacia’s positive preannouncements and secondary offering completed last week. Acacia continues to benefit from strong demand across Web 2.0 direct customers, Chinese original equipment manufacturers and metro 100G cycles. Acacia additionally is benefiting from strength in China broadband optical roll-outs.
The company has twice raised estimates for the quarter, which it will report on November 10. The stock was hit this past week on a bad earnings miss from a competitor and lower than expected earnings from a big client in China.
The Merrill Lynch price target is a gigantic $130, and the Wall Street consensus is lower at $119. The shares closed Friday at $71.27, which compares to a 52-week high of a stunning $128.73.
This stock also raced higher only to pull back sharply. Nutanix Inc. (NASDAQ: NTNX) provides enterprise cloud platform solutions that converge traditional silos of server, virtualization and storage into one integrated solution. The company’s software products include Acropolis, which delivers performance distributed storage and application mobility solutions, and Prism, which delivers integrated virtualization and infrastructure management, operational analytics and one-click administration solutions. Its solutions address a range of workloads, including enterprise applications, databases, virtual desktop infrastructure, unified communications and big data analytics.
The company serves customers in a range of industries, including automotive, consumer goods, education, energy, financial services, health care, manufacturing, media, public sector, retail, technology and telecommunications. It also sells its services to service providers who utilize its platform to provide various cloud-based services to their customers. The company has operations throughout North America, Europe, the Asia-Pacific, the Middle East, Latin America and Africa.
Needham rates the stock a Buy with a $36 target, and Outperform at Baird with a $37 target. The consensus price target is $32.80. The shares traded on Friday’s close at $24.84. The 52-week high is $46.78.
This rounds out the three red-hot IPOs that may be on sale. Twilio Inc. (NYSE: TWLO) provides cloud communications platform that enables developers to build, scale and operate communications within software applications through the cloud as a pay-as-you-go service in the United States and internationally. It offers programmable communications cloud software that enables developers to embed voice, messaging, video and authentication capabilities into their applications through application programming interfaces. The company also provides use case products, such as a two-factor authentication solution.
While the stock has been hit very hard, it is pretty obvious that the short sellers have swarmed not only this company, but the other two as well. According to the Wall Street Journal, an incredible 49.8% of the float is sold short. Any positive news, and short sellers will run to cover their positions.
William Blair has an Outperform rating on the stock, but we couldn’t find the price target. The consensus target is $39.67. Shares ended last week at $35.42, and that’s versus a high for the year of $70.96.
Clearly the top pick of the three is Acacia, as it is expected to make $2.84 this year and an astonishing $3.40 next year. At the most recent close, that has the company trading at 21 times 2017 earnings, with growth in revenue expected to be 35% or more next year. All three make sense for aggressive accounts looking to bottom fish some.