4 tech stocks for 2012
Here's a look at four technology stocks riding the IPO wave into 2012.
While the window for tech initial public offerings remained closed during the third quarter with just four venture-backed companies pursuing IPOs, the trend appears to have reversed in recent weeks.
Earlier this month, Groupon (GRPN) netted $700 million in an IPO despite scrutiny over its accounting metrics and concerns about its long-term ability to turn a profit. The offering was the largest since Google's (GOOG) in 2004, as Groupon ended a dearth of IPOs in the last several months and opened up the doors for a slew of other high-profile companies to toss their hats into the ring.
"Groupon was the 800-pound gorilla everyone was waiting to see go out of the gates," said Lee Simmons, an analyst with Dun & Bradstreet. "They had such a strong showing it opened the gates even further for a flood of these IPOs to come down the pipeline."
Last Thursday, consumer reviews site Angie's List (ANGI) raised $114 million in its IPO. Shares opened at $18, nearly 40% higher than its initial offer price. On the same day, user review site counterpart Yelp filed for a $100 million IPO. Both Angie's List and Yelp are unprofitable.
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Social gaming company Zynga also filed for an IPO and is rumored to be going out after Thanksgiving. The FarmVille creator could boast the biggest offering yet as it looks to raise up to $1 billion.
As the market for tech IPO heats up, so does investor enthusiasm for the sector as a whole.
A recent study by Silicon Valley law firm Fenwick & West showed "up rounds" exceeded down rounds for venture financings 70% to 15%, meaning the price per share at which companies sold their stock has increased since their prior funding round.
We take a look at several newly public tech stocks, how they've performed this year and what analysts are expecting going into 2012.
The company raised $235 million in its IPO, selling shares at $16 a piece.
During its most recent quarter, the company reported an adjusted profit of 2 cents a share on revenue of $67 million. Analysts had expected Pandora to break even on a per share basis on revenue of $60 million.
Despite topping analysts' estimates, the company has faced skepticism about its ability to turn a profit as well as its power to fend off stiff competition from tech giants like Amazon (AMZN) and Google (GOOG), as well as upstarts like Spotify, all which are trying to gain market share in the online music space.
These concerns have sent Pandora shares sliding nearly 30%, closing Friday at $12.88.
The company will report its third-quarter earnings on Nov. 22. Analysts are expecting a loss of 1 cents a share and revenue of $71 million.
Analysts believe much of Pandora's growth will come from its mobile business.
Around half of Pandora's advertising revenue came from mobile devices last quarter, the first period that the company has reached this milestone, Pandora said.
"The recent rise of smartphone and tablets as mobile platforms that Pandora can take advantage of should be a strong driver of listener hours and advertising revenue as the penetration of these devices continues to expand," BMO Capital Markets analyst Edward Williams wrote in a recent analyst note.
Pandora lets listeners create personalized radio stations based on their tastes. Listeners can then provide feedback by selecting "thumbs up" or "thumbs down" to influence the types of songs that are played going forward.
The service is available for free through the Web, tablets and smartphones and is also integrated into the sound systems of several car makers. The company's iPad app is the most downloaded free app in the history of Apple's (AAPL) App Store and its iPhone app is the second-most popular, following Facebook.
2. LinkedIn (LNKD). When professional networking site LinkedIn debuted on the NYSE in May, shares opened at $83, double the initial offer price.
The first high-profile tech firm to go after an IPO in months, LinkedIn signaled a turning point for the sector.
While shares of LinkedIn have cooled since then -- they closed Friday at $72 -- the stock still remains strong.
Last week, LinkedIn completed a secondary offering, raising $88 million and doubling the number of shares available in the public markets. The selling shareholders included Bain Capital which sold all of its 3.7 million shares, around 4.2% of the company.
During the most recent quarter ended in September, LinkedIn said it has grown its membership base to 131.2 million, an increase of 63% from the same period last year.
The company reported its first quarterly loss since going public, while revenue more than doubled to $139.5 million, sparking concern that the company is overspending.
Analysts believe much of LinkedIn's growth will come from new products, particularly as the company opens up its platform to third-party application providers.
In April, LinkedIn announced it was releasing plug-ins that developers could integrate with their own Web sites which allows users to share articles with the LinkedIn community, view member profiles and browse company data.
"To sustain robust revenue growth rates, the company will have to move beyond simple hiring solutions and enter new markets," Morningstar analyst Rick Summer wrote in an analyst note.
The company, whose biggest customer is Facebook, priced its offering at $19, north of its projected range of $16 to $18 a share.
Fusion-io has seen its shares jump a whopping 78% since its IPO debut.
Shares closed Friday at $36.90.
In its most recently quarter, ended in September, the company reported revenue of $75 million, almost double its sales from the same period last year.
Last week, Fusion-io said it will offer 3 million common shares as part of a secondary offering.
Shares are up over 30% this year after pricing at $15 a share on the NYSE.
During the most recent quarter ended in September, revenue grew 60% to $113 million. Adjusted profit jumped 55% to $36 million.
Last week, Stifel analyst Jordan Rohan upped his price target on Bankrate to $24 from $21, citing demand for its mortgage products and credit card business.
The company's acquisition of InsWeb's insurance lead generation and marketing business last month for $65 million is also expected to propel growth.
Shares of Bankrate closed Friday at $19.97.
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These hot movers could rise by double digits in coming months.
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