Technology

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

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.

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.

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) 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.