These debutantes hit the ground running, but now they’re stumbling. They deserve a second look.
There have been a lot of compelling new stocks hitting the market over the past year. They may have hit the ground running, but initial public offerings (IPOs) have been among the hardest-hit names during the recent correction for growth stocks.
Unity Software (NYSE:U), fuboTV (NYSE:FUBO), and Lemonade (NYSE:LMND) are three fast-growing companies that went public over the past year. They were all hot rookies early in their publicly traded tenure but have sold off sharply in recent weeks. Let’s see why these three stocks that have been roughly cut in half as of Wednesday’s market close since peaking deserve your due diligence.
1. Unity Software — Down 47%
The game’s afoot at Unity Software. The cloud-based platform for real-time 3D content creation was originally a hit with game developers, but a wider net has been tossed out to Hollywood studios, architects, engineers, and graphic designers. The client base is expanding, and Unity has a couple of revenue streams to make the most of its newfound popularity.
Unity’s not hurting for business. Revenue rose 43% last year, including a 39% year-over-year increase in February’s fourth-quarter report. Customers are staying close, too. Unity’s dollar-based net expansion rate — a popular metric for software-as-a-service (SaaS) stocks that measures client engagement — has grown from 133% to 138% over the past year. In other words, the average returning account is spending 38% more on Unity’s platform than a year earlier.
2. fuboTV — Down 57%
Folks are cutting the cord, and live-TV streaming services are growing quickly as a way to fill the digital void for folks craving live sports and network programming. The fastest-growing player in this niche is fuboTV.
Its customer count has risen 73% over the past year. While it’s not the top dog here, its 547,880 customers are generating nearly $70 a month in revenue between subscriptions and rapidly growing ad revenue.
FuboTV is hoping to monetize its “sports first” market positioning this year. It will roll out a fantasy sports platform for its viewers this summer and expects to launch an online sportsbook in the fourth quarter. Despite the company’s accelerating growth and its short history of jacking up guidance, this is the one name on the list that has actually surrendered more than half of its value since peaking three months ago.
3. Lemonade — Down 53%
Lemons may make you pucker up, and investors who have seen their Lemonade shares give up nearly half of their peak gains may feel the same way. The high tech and potentially disruptive insurance company is still a name worth sipping. Lemonade has reinvented the insurance shopping and claims reporting experience. It leans on artificial-intelligence chatbots to serve up quotes, and the claims process can sometimes be completed the same way.
Lemonade initially launched as a platform for renters and homeowners but recently rolled out policies for pet owners. Consumers — primarily young renters and first-time homebuyers — are flocking to Lemonade. It’s seen its active policies climb 56% over the past year, and now is serving 1 million accounts. Premiums paid per account are up 20%, on average, over the past year, and its gross loss ratio keeps improving alongside the platform’s scalability.
Unity Software, fuboTV, and Lemonade would have to roughly double to get back to their earlier highs. They may not all get there, but this is an opportunistic time to consider adding one of these three fallen IPO angels to your watch list.
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