2 IPO Stocks Exploded Out Of The Gates This Week
The market for initial public offerings (IPOs) was strong in 2020 and shows no signs of stopping. This week, we have the highly anticipated IPOs from Coupang (NYSE: CPNG) and Roblox (NYSE: RBLX). Both are seeing their revenue ballooning during the pandemic. You could almost say these two companies are swimming in cash. South Korean e-commerce giant Coupang saw its revenue increase by 90.8% year-over-year. While that revenue growth is simply impressive, gaming platform Roblox is not doing too bad either. Revenue for the popular gaming hub came in 82% higher to reach $923.9 million.
Tech IPOs in the past year have often followed the same pattern. That is, teasing retail investors with a price that is only accessible to a few institutional investors. Retail investors soon arrive and rush to get in on the action. The real question here is, should investors even consider buying CPNG stock or RBLX stock right now after their initial pop?
Instead of rushing to answer this question. What really matters after the initial pop depends on how quickly insiders eventually cash out, right? The truth is, many of the insiders will eventually cash out and the outcomes are as one would expect. Just take a look at Spotify (NYSE: SPOT). The streaming company saw its shares stagnate for a few years after the initial pop before the run-up in 2020. Now, this is not to say the same could happen to either CPNG stock or RBLX stock. But investors might want to think twice before placing bets. With all the hype going around these two companies, it’s worth digging deeper before making a decision. If you are one of the investors looking to buy into these new entrants, read on.
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Coupang IPO (CPNG)
Coupang, dubbed the Amazon (NASDAQ: AMZN) of South Korea, has pulled off the largest US IPO so far this year. The company saw its share price skyrocketed 41% higher on Thursday’s trading. The company made a name for itself through its guaranteed same-day or next-day delivery service. With the spike in CPNG stock price, the company fetches a valuation of $84.5 billion. Coupang’s debut is the biggest for a foreign company since Alibaba’s (NYSE: BABA) blockbuster 2014 debut.
The company also sees strong potential for further expansion. That is because South Korea is home to one of the largest and fastest-growing e-commerce opportunities globally. The country’s total e-commerce spend could grow to $206bn by 2024, from $128bn in 2019.
That implies a compound annual growth rate (CAGR) of approximately 10 percent, according to a report from Capital.com. And as Coupang continues to snap up market share, it may be looking at a huge growth runway ahead.
Strong Backings From SoftBank Group and BlackRock
It’s also worth mentioning that the company has strong backings from SoftBank and BlackRock. The cash injection from these notable firms should help it further strengthen its fulfillment capabilities. And it comes at the right time. With competition intensifying in South Korea, having notable backers could help Coupang eat up more market share as more retailers ramp up their online offerings.
Its focus on user experience has resulted in cohorts of loyal customers. The strong sales growth and upside in nascent business segments make a strong case for the CPNG stock. For this reason, investors have been fighting for a piece of the Korean e-commerce giant, sending its stock flying on its first day of debut.
“We were fortunate to have demand from a lot of great investors and we didn’t have room for all of the great investors out there,” Mr. Kim said, who is both Coupang’s founder and chief executive.
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Roblox IPO (RBLX)
Roblox is the gaming platform that surged in popularity during the pandemic. It has gained a foothold primarily among kids who were staying at home because of school closures.
Initially, Roblox had a user base of several hundred people. Now, the online gaming platform boasts tens of millions of games played by 32.6 million daily active users. Roblox has seen its daily users skyrocket 85% over the past year, sending sales up 82% along with them.
“Roblox has been growing for 15 years, driven by our community, driven by the awesome content, driven by our creators, and driven by our ability for people to do things together. That’s a long-term growth path, and we believe that continues forward, even after Covid,” Roblox CEO David Baszucki
Cathie Wood’s Ark Invest Give RBLX Stock A Boost
Seeing IPO stock price skyrocketing on its first day of trading could be the norm today. However, having another double-digit percentage gain on the second day could be hard to come by. And that’s what happened with RBLX stock. This came after the announcement that Cathie Wood’s fund bought into the stock on its first trading day.
The Ark Next Generation Internet ETF (NYSEARCA: ARKW) added more than 500,000 shares of the stock, which accounted for about 0.5% of the fund’s portfolio. Wood has been a fervent supporter of Tesla’s (NASDAQ: TSLA) stock early on. With her reputation in picking disruptive stocks, could her interest in Roblox signify bigger things to come?
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Coupang (CPNG) Stock Vs Roblox (RBLX) Stock
With all the buzz going around tech IPOs, it is no surprise both stocks skyrocketed on their first day of debut. These stay-at-home stocks are enjoying unprecedented growth, thanks to the pandemic. And it is also for this reason that it may be hard to value these companies as growth may taper off when the world slowly returns to normalcy.
As Coupang slowly snaps up the market shares in one of the largest and fastest-growing e-commerce markets, it makes sense to be bullish on CPNG stock. But with the valuation coming out so hot, I would need to be really optimistic about its prospects before jumping right in. Considering that it was only valued at $30 billion earlier this year, investors have to take note of the steep premium. And that could take away the potential price appreciation when the hype cools off.
On the flip side, Cathie Wood’s involvement may have sparked demand for RBLX stock. Ark Invest, which focuses on disruptive companies, appears to be keen on what Roblox could potentially bring to the world of gaming. Everybody knows Cathie Wood’s ability in stock picking. And you could expect meaningful success with most, if not all of her investments. Roblox is particularly difficult to assess because there’s no telling what will happen when kids return to school and play with their real-life friends. However, if you would like to spread your bets, these will be solid potential names however you look at them.
