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3 IPOs With a Lot to Prove Next Week

By Rick Munarriz – Feb 21, 2020 at 10:45AM

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Three controversial debutantes report quarterly results on Tuesday. Let's kick those tires.

Earnings season isn't over yet. There are still plenty of publicly traded companies that have yet to come out with their quarterly financial updates, and that list includes several of the more controversial names to go public in 2019. 

SmileDirectClub (SDC 1.94%), The RealReal (REAL 6.17%), and Revolve Group (RVLV 1.68%) are three interesting companies serving up fresh financials next week. They all went public over the past year, so investors still don't have a good feel for how they will fare relative to expectations.

Let's take a closer look at each debutante ahead of their stock-moving reports.

A woman inserting her clear dental aligners

Image source: SmileDirectClub.


Recent IPO SmileDirectClub has had its teeth kicked in. The provider of clear dental aligners at a discount to traditional outlets for teeth-straightening solutions has had a rocky road since going public at $23 in September. It was one of last year's biggest losers among the 2019 IPO class -- closing out the year in the single-digits -- but it's trading 38% higher so far in 2020. 

The platform's popularity is growing, judging by the 51% surge in revenue in its first quarter as a public company. It will get another chance to impress the market when it offers up its second financial report as a public company on Tuesday afternoon.

There's a lot going on at SmileDirectClub these days. Some of the things that have been pushing the shares higher in 2020 include the end of its exclusive supplier agreement that will allow it to widen its target market and a distribution deal to sell some of its dental products in the country's largest retail chain. However, an NBC News investigative report earlier this month profiles some customers who have had unsavory experiences with the corrective aligners. SmileDirectClub fired back, defending the quality of its products and its teledentistry model. It should be a lively earnings call with all of the headwinds and tailwinds coming together. 

The RealReal

The leading online consignment platform for verified luxury goods will also be announcing financial results shortly after Tuesday's market close. The play on the circular economy trend hasn't had a problem drawing a crowd for its discounted second-hand goods. It had 542,987 active accounts at the end of September, a hearty 53% surge from where it was a year earlier.

The RealReal also has some negative televised publicity to tackle. Late last year, a CNBC report detailed the hundreds of fake products that were returned by buyers. Counterfeit goods will always be a problem in the resale market, but it's a big hit for The RealReal because the model emphasizes that all goods sold through its marketplace are verified to be authentic. Right now, TheRealReal is another broken IPO, trading 22% below last summer's IPO debut at $20. 

Revolve Group

The only name on this list that isn't trading below last year's IPO price is Revolve Group, an online fashion retailer with a unique twist that leans on thousands of social media influencers to promote, and in some cases curate, its apparel offerings. Revolve Group is trading 14% above last year's IPO starting line of $18. It joins SmileDirectClub and The RealReal in reporting quarterly results on Tuesday. 

Revolve Group hasn't had negative media reports to battle the way the other two rookies on this list have. Revolve Group actually generated early raves for coming public as a profitable online retailer. However, the stock has taken a hit after its first two quarterly reports as a public company. Weak top-line guidance has been the culprit in both of its earlier reports, so it will need to have a rosy outlook for 2020 to avoid joining SmileDirectClub and The RealReal in the camp of broken IPOs. 

There is a lot of money to be made when you invest in IPOs, but you have to choose the right ones. All three stocks should be big movers on Wednesday, but whether those moves are higher or lower depends entirely on what they each have to say after Tuesday's market close.

Rick Munarriz owns shares of SmileDirectClub, Inc. The Motley Fool owns shares of and recommends Revolve Group Inc. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Revolve Group, Inc. Stock Quote
Revolve Group, Inc.
$24.26 (1.68%) $0.40
The RealReal, Inc. Stock Quote
The RealReal, Inc.
$1.64 (6.17%) $0.10
SmileDirectClub, Inc. Stock Quote
SmileDirectClub, Inc.
$0.99 (1.94%) $0.02

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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