Technology

Why Last Year's Loser IPOs Are Some of the Biggest Winners in 2020

Lee Jackson

One of the biggest stories on Wall Street for 2019 was the rebirth, and then the crash and burn, of some highly touted initial public offerings (IPOs). The flameout of last year’s unicorns may remind investors of what happened to Facebook eight years ago.

On May 18, 2012, Facebook held its initial public offering and, at that time, it was the largest technology IPO in U.S. history. Facebook offered 421,233,615 shares at a price of $38 per share and raised $16.007 billion through that offering.

The deal supposedly was massively oversubscribed but ended flat the first day of trading. Within a month, the shares traded down over 30%, and the slide finally stopped when the stock hit a low of $17.55. Since then, the rest is history, as the stock has traded as high as $224.30.

Some of last year’s hottest deals did the same thing, and it may be time for investors to revisit these companies as investors have locked onto the incredible growth potential that many of them offer.


We screened the BofA Securities research universe and found five companies that could be among the next generation of super-hot technology stocks to buy. While some already have blown through the firm’s current price targets, you can bet the analysts are crunching the data and likely are getting ready to lift their price objectives.

Bill.com

This company has been the biggest winner since 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, accounts receivable software integrated with payments processing service (ACH, check writing, cross border payments and virtual credit cards) to small and medium-sized businesses.

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 second-quarter results, with subscription transaction revenue upside of $1.7 million and $3.1 million from variable transactions.

The BofA Securities analysts feel that Bill.com should represent a core growth holding, given expected consolidation of SMB payable/payments industry. They said this after earnings were released last week:

BILL reported solid first quarter results with subscriber growth of 50% exceeding our 29%, though transaction revenue was $400,000 below from macro impact. Increased monetization of total payment volume with premium transaction services and still strong customer additions are more than offsetting headwinds. Q4 core rev guide $500,000 higher than our estimates. Reiterate Buy rating.

The BofA Securities analysts raised their price target to $85 from $58, while the consensus price target across Wall Street is just $50.14. The Bill.com stock closed last Friday’s trading at $77.27 per share.

CrowdStrike

Shares of this cybersecurity giant have rallied sharply off the March lows but still 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 last week it has the highest overall rating among vendors and was named a 2020 Gartner Peer Insights Customers’ Choice for Endpoint Detection and Response. The CrowdStrike Falcon platform has an overall rating of 4.9 out of 5 from 106 verified customer reviews, the highest rating of all vendors, and was named a Customers’ Choice in this market for the second consecutive year.

BofA Securities has a $75 price objective, which may be headed higher soon. The posted consensus price target was last seen at $73.32. Note that Friday’s last trade for CrowdStrike stock was at $77.14, above both target prices.