It’s always interesting to see which companies become Wall Street darlings and which ones fade away into obscurity after going public. IPOs tend to attract a lot of attention because they offer investors the opportunity to invest in something new and potentially groundbreaking. However, investors must do their research and dive into a company’s business model before deciding to buy a newly public company, as they come with added risks and high levels of uncertainty.
One of the safer approaches to investing in stocks that have recently gone public is to wait a few weeks or months after the IPO date so that you have some trading history to maneuver off of instead of buying in earlier and putting yourself at higher risk of a big pullback. There’s been a lot of activity in the IPO market this year and while they might not all be winners, there are a few stocks that stand out. We’ve put together a shortlist of 3 hot IPO stocks to buy now to help you sort through the hype and make decisions that could benefit your portfolio in the long-term.
GoodRx
It’s typically rare to see a growth company going public that is already profitable, but that’s exactly the case with Goodrx (NASDAQ:GDRX). This company’s platform helps its users with finding the best prices on prescription drugs by aggregating and analyzing pricing data. The platform also features telehealth services like medical provider consultations and lab tests. We know that telehealth is on the rise and that medical costs in the U.S. are very expensive, which is why this is such a compelling stock to consider.
GoodRx makes money through commissions on the prescriptions that are filled via its platform. The company can reduce the price of prescription drugs by up to 70% without charging any fees, which is certainly attractive for people that regularly need medication. The company reports 80% repeat transactions and has helped consumers save over $20 billion thus far. GoodRx began trading publicly on September 23 and shares rallied 53% during the first trading session. Now that the market has had a little bit of time to digest the company’s debut, it might be a good spot to start looking at adding shares.
JFrog
Another recent IPO stock that looks promising at this time is JFrog (NASDAQ:FROG), a Software-as-a-Service company that operates in the cloud sector. Without getting too technical, investors should know that JFrog offers an end-to-end DevOps platform that helps organizations successfully develop and deploy software updates across any system. Almost every company on the planet has a real need for getting software updates out quickly and without issues, which is why JFrog has serious potential.
This is a high-growth company with positive free cash flow and a potentially lucrative niche. Companies that operate in the cloud computing space have been some of the best performers in the market this year, and JFrog could keep that trend going. The stock is up over 80% from its IPO price of $44 and could be on its way back to post-IPO highs of $90.8 shortly. However, it might be best to wait until the company reports its Q3 earnings on November 4 before adding shares, as newly public companies can be volatile around those big events.
Dada Nexus
With Dada Nexus (NASDAQ:DADA) Limited, you have a company that operates in the world’s second-largest economy and is benefitting from several positive growth catalysts at this time. This Chinese company offers local on-demand retail and delivery platforms that allow retailers and brand owners to sell their products through online channels. With the pandemic accelerating the rise of e-commerce and essentially forcing brick-and-mortar retailers to offer their products online, Dada is experiencing rapid growth.
In late August when the company reported its Q2 earnings, Dada saw year-over-year revenue growth of 93.1% along with an increase in total gross merchandise volume of 98.1%. These robust growth numbers are proof that the current consumer environment is helping companies like Dada in a big way. Dada continues to expand into new cities and towns in China, has signed up some big retailers, and is working on adding new product categories that should only benefit the company in the long-term. In June, U.S. retail behemoth Walmart (NYSE:WMT) revealed that it has taken a $2 billion stake in Dada Nexus, which is a nice vote of confidence for investors to also consider.