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Zuora Takes Off During Roaring IPO

Published 04/24/2018, 08:39 AM
Updated 07/09/2023, 06:31 AM

Early backers of Zuora Inc (NYSE:ZUO), a subscription biller that’s evidently taken the marketplace by storm, earned a tidy profit on Wednesday when the company debuted on the open market for the first time. The company’s shares instantly soared upwards once trading began, jumping up by nearly 43 percent at one point, and the debut saw the company auction off some 11 million shares to a hungry audience of investors who are already dying for more.

Here are the specifics behind Zuora’s IPO, and how the company may fare in the coming days after its blockbuster IPO.

Going above and beyond expectations

2018 has certainly been an interesting year for the stock market; President Trump’s trade dispute with China has spawned a seriously grim cloud looming over the DOW, and his incessant tweeting about companies like Amazon (NASDAQ:AMZN) have caused their share valuations to plummet in but a few hours. Not every sector of the market is faring poorly, however; despite some uproarious headlines, the tech sector has had a pretty tremendous year, and Zuora’s (NASDAQ: ZUO) recent debut illustrates the fervent, frenzied state many tech investors are finding themselves in when it comes to this years IPO.

To call Zuora’s debut on the market a roaring success may be one of the greatest understatements of the year; the company had a tremendously successful IPO, pricing some 11 million shares at $14 apiece. This was above the company’s expected range of $11 to $13 each, and generated it a total valuation of some $1.4 billion, an impressive figure that will wow many of the company’s prospective backers. Stocks quickly climbed to as much as $20 per share on Wednesday when trading began, and the market appears utterly infatuated with the subscription billing service that’s made a name for itself within the disruptive tech scene.

Not everything is stellar for Zuora, however; the company’s blockbuster debut didn’t overshadow the fact that it’s been posting some serious net losses recently, for instance. According to filings made with the SEC, Zuora incurred net losses totaling around $47.2 million in 2018, for instance. The company has been hoping to offset those losses with growing revenue streams, and on that front, it’s been enjoying some progress; its revenue of roughly $167 million is nearly a 49 percent increase from last year, for instance.

If Zuora keeps swelling its revenue figures, it’s likely investors will look past its recent history of net losses. After all, those familiar with the tech scene understand that a great many companies who go public face some net losses in the first few years of their operations, particularly when they’re in competitive markets, like Zuora’s. The huge profits it reaps in from its IPO, too, will help the company prove to potential financial backers that it will be flush with for investments in the near-future.

Can Zuora keep succeeding?

Having a tremendously successful IPO and remaining buoyant in the market in the long run are two different things, and many investors considering throwing their weight behind Zuora probably want to know more about the company’s long-term prospects before they make any final decisions. To help make a better informed decision, they should read up on some of the key facts driving the company’s business model, such as the fact that it sees the economy of the future being dominated by an “everything-as-a-service” model. If Zuora’s predictions turn out to be true, the company could be reaping in huge revenue streams, like a new breed of marijuana companies selling purple kush, especially given the turn towards tech that the broader markets taken over the past decade.

Zuora has plenty of room to expand its existing services, especially in the retail sector, and those investors looking for a potential unicorn to back for the long haul will likely love what they see when they inspect Zuora’s existing operations. The subscription economy, which is seeing global consumers pivot to subscription services more and more, will doubtlessly continue to grow in future years, meaning companies like Zuora are well-poised to take advantage of the money that’s to be made facilitating subscription services. Besides the explosive growth of the subscription services industry, Zuora also has some pretty steady hands at the wheel making executive decisions; the company’s recent growth in revenue streams should convince investors that those currently leading it have a solid game plan for the future. If the money it gleams from its IPO is put to good use, expect Zuora to quickly become one of the most well-recognized names in the tech investing market. Whether it can keep its shares growing as quickly as they have since its market debut remains to be seen, but one thing is clear; if Zuora can keep narrowing the gap between its revenue figures and current net losses, the company has a bright future in the marketplace.

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