There's nothing as exciting -- and risky -- as a red-hot IPO. Investors love that new stock smell, and even if a debutante is hitting the market at an elevated valuation, there's still the flawed perception by some folks that they are getting in on the ground floor.
There have been a handful of rock stars in 2019, but most of them have cooled off lately. Well-heeled investors that warmed up to the underwriters ahead of the offerings to get in at the IPO price for Beyond Meat (BYND 1.80%), Zoom Video (ZM 2.36%), and ShockWave Medical (SWAV -3.09%) are still sitting on big gains, but the same can't be said for most investors who didn't have a choice but to chase these stocks higher in the open market. All three stocks have surrendered at least a third of their peak values. Let's check out the rise and the fall of each one as we try to get a handle on how to invest in IPO stocks.
Beyond Meat: Down 69% from its peak
There's no denying that a growing number of consumers are turning vegan or vegetarian, and that has sparked interest in plant-based proteins. Beyond Meat hit the market with strong tailwinds and a lean float, the perfect combo for a hot IPO.
Beyond Meat went public at $25 in May, and two months later was trading as high as $239.71. It has now fallen back to the double digits. Beyond Meat stock has still tripled for investors that got in ahead of its IPO, but some momentum chasers that got in at the summertime peak have seen their positions lose more than two-thirds of their value.
Beyond Meat is still growing at a heady clip. Net revenue soared 250% in its latest quarter. However, in a niche where the barriers to entry are minimal, it's easy to see why a company expecting to generate $265 million to $270 million in revenue this year had no business fetching a market cap approaching $15 billion the way it did in July.
Zoom Video: 35% off its peak
Another stock that poked its head into a triple-digit price two months after its debut before falling back into the double digits is Zoom Video. The provider of enterprise video conferencing solutions has a hot and reliable platform, but with growth decelerating, it's hard to live up to the initial hype.
Zoom Video stock was already trading 35% below its May high when it announced fiscal third-quarter results after Thursday's market close, and the stock opened sharply lower on Friday morning after investors got to mull over the numbers. Most companies would love to post the 85% year-over-year top-line growth that Zoom did in this week's report, but Zoom Video's continued deceleration has caused revenue gains to slow in back-to-back quarters since the company went public. Analysts at Baird, RBC Capital, and Stifel are all lowering their price targets on the stock this morning.
ShockWave Medical: 42% off its peak
Many of the debutantes that lit up the scoreboard in the first half of this year have great stories to tell. Beyond Meat is rising high on the growing popularity of restaurants adding plant-based burgers to their menus. Zoom Video is keeping businesses connected. ShockWave Medical has an equally juicy tale to tell, as it's taking a high-tech approach to tackling cardiovascular disease with its platform that emits sonic waves to break up calcium deposits within arteries.
All three of these IPOs have been posting strong results, and typically boosting their guidance. ShockWave Medical is eyeing 234% to 242% growth for all of 2019. However, we're ultimately talking about no more than $42 million in revenue this year. Investors have cooled on the stock's high valuation, and it also didn't help that it sold $90 million in stock in a secondary offering last month and that its CEO unloaded a chunk of his shares.