Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Tax Software Provider Avalara Enjoys Mammoth IPO

By Alex NewmanStock MarketsJun 18, 2018 08:00PM ET
Tax Software Provider Avalara Enjoys Mammoth IPO
By Alex Newman   |  Jun 18, 2018 08:00PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items

The tax software provider Avalara Inc (NYSE:AVLR) enjoyed a massively successful IPO last Thursday, reaping in tens of millions more than the company initially expected. Shares of the company soon skyrocketed after its debut, nearly doubling in a single day, though trading has since cooled off. While some are worried that Avalara could prove to be significantly overvalued, the company’s growing revenue streams and recent regulatory relief have many investors interested in it.

An analysis of Avalara’s S-1 filing show that the company may not necessary be able to sustain its huge growth, however. These are the key facts behind Avalara and its recent IPO.

Can Avalara keep it up?

When news broke that Avalara’s shares were trading upwards after its market debut on Thursday, not too many in the market were surprised; after all, the company raised its expectations for the IPO slightly before its debut on the New York Stock Exchange, and many expected it to net a clean $150 million at least. When the company eventually made the 7.5 million shares of common stock it intended to sell open to the market, however, investors quickly scooped up as much as they could, and share prices briefly soared as high as $44 per share.

All in all, the company reaped in at least $180 million with its mammoth IPO, greatly exceeding expectations. According to its initial S-1 filing with the SEC, Avalara had hoped for some $150 million, though expectations had indeed been raised slightly before it hit the market. Some are concerned that its share prices are actually overvalued, given that they virtually doubled right after hitting the market, but the recent trend of companies digitizing their tax operations with more software has many betting on the company.

That S-1 filing contains some concerning news, however; while Avalara has steadily seen its revenue growing recently, enjoying a 27 percent surge in revenue in 2017 alone, the company has yet to turn a profit. It’s valuation at the height of its share trading nearly hit $3 billion, too, a staggering sum that many in the market considered absurdly too high for the tax software provider that shows promise but isn’t yet a behemoth in the market.

The company that’s reshaping taxes

In a nutshell, Avalara’s operations are centered on the automating tax software programs for companies that need to buy YouTube subscribers, which are trying to cut cost by going the digital route. By using advanced software, the company greatly streamlines the tax process and helps minimize costs while boosting efficiency, and is becoming fairly popular on the market. The company’s prospectus claimed that in 2017 alone it serviced well over 16 million tax determinations each day, for instance.

Given that Avalara also has more than 200,000 customers of disparate sizes, it’s fair to say that it has a healthy audience that many investors will see potential in. Nonetheless, it’s worth discussing the fact that the bar has been set incredibly high for the tax software provider, and Avalara’s history of unprofitability should be much more concerning to early backers than it appears to be. The company posted net losses of some $64 million in 2017, after all, and while a rush of cash into its coffers will likely prove to be a boon in the market, it’s not showing signs of turning a profit soon.

Given that the global tax software industry appears to be thriving currently, however, Avalara could yet ride out the success from its IPO to make a serious splash in the market in the long term. While cautious investors are likely to shun Avalara thanks to its less-than-stellar finances, the company could yet woo over many who are convinced that an increased wave of digitization across the market will continue to see an influx of customers employ Avalara’s services. Avalara’s growing revenue streams may seem appealing to some, but its ultimate net-losses simply give truth to the fact that the company’s nearly $3 billion valuation is probably too steep for it. Tax software will doubtlessly remain popular in the near future, and Avalara is showing healthy signs of growth that could yet make it a force to contend with, but a rapidly inflating share price is likely to beset the company with some serious expectations in the near future it may not be able to meet.

Tax Software Provider Avalara Enjoys Mammoth IPO

Related Articles

Tax Software Provider Avalara Enjoys Mammoth IPO

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email