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3 IPOs Under $10 You Can Buy Now

By Rick Munarriz - Mar 18, 2020 at 9:15AM

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Three fast-growing companies went public in the double digits in 2019. They are broken -- but ridiculously cheap -- right now.

The brutal market correction has been harder on the rookie class than the more seasoned publicly traded stocks. A lot of promising speedsters that hit the market in the double digits over the past year have crashed through the $10 floor. Many of these broken IPOs may never bounce back, but let's take a look at three debutantes that have the potential to come back in 2020.

The RealReal (REAL 0.80%), DouYu (DOYU 4.35%), and Revolve Group (RVLV 1.54%) are three names with single-digit price tags worth watching now. Let's take a closer look at each stock trading below $10 and what it can do to get back on track (prices are from Tuesday's close).

Revolve Group holiday cover featuring designer brands.

Image source: Revolve Group.

The RealReal -- $7.58

The coronavirus outbreak has dried up the will to shop for luxury goods, and a likely recession will weigh on consumers' ability to afford them. So, it's easy to see why investors have cooled on an online platform specializing in high-end apparel and vintage merchandise. But let's give The RealReal a more promising spin on its chances for success in this challenging climate.

The RealReal operates the leading online consignment platform for verified luxury goods. The key word there is consignment. The RealReal deals with secondhand goods, and that means cheaper prices for buyers and higher margins for The RealReal. The world is loaded with counterfeit goods in the resale market, and that's where The RealReal stands out -- with experts who verify the items listed on its online consignment shop. 

Revenue rose 57% in its latest quarter. Gross merchandise volume of $303 million during the seasonally potent holiday-containing quarter was 39% ahead of last year. The RealReal's take rate improved to a beefy 36%. Its active buyers count for all of 2019 -- 581,738 -- is a 40% improvement over 2018. Like many companies dealing with today's blurry reality, The RealReal just pulled its earlier guidance calling for 30% to 33% growth in gross merchandise volume for 2020. As a smart play on the circular economy trend, it's hard to believe a growing company that went public at $20 last summer is now in the single digits. 

DouYu -- $7.87

Chinese IPOs have been a hard sell over the past year, but it's hard to ignore DouYu. It's a leading player in the streaming of online gaming events, and is commonly referred to as the "Twitch of China." Revenue rose 81% to $261 million in the third quarter.

There were 163.6 million monthly active users by the end of September, and while that pace has slowed -- up just 15% over the past year -- DouYu's top line is growing considerably faster. DouYu has been able to improve the monetization of its platform, and it's also getting more of its freeloaders to pay up for premium perks. 

DouYu reports its fourth-quarter results later this week. Its guidance in late November was calling for 69% to 75% growth in revenue, but that was nearly four months ago. A lot has changed, but one can also argue that streaming of esports is one niche that should continue to thrive even in the face of the pandemic that originated in the company's country.

Revolve Group -- $9.22

A rare profitable dot-com retailer that went public at $18 in June of last year -- and peaked at nearly $50 two weeks later -- is the latest IPO to buckle below the $10 floor. Revolve Group has a unique approach to e-tail, leaning on social media influencers to promote its apparel offerings. 

Reality hasn't been as kind as the initial hype. Revenue growth has decelerated in three of its first four quarters as a public company, including a weaker-than-expected 16% top-line climb in its latest report. It was a rough report all around. Revolve's active customers rose 27% to 1.49 million, but the number of orders placed in the holiday-containing quarter only grew at half that pace. Margins also declined as Revolve had to resort to markdowns to clear through a surplus of inventory. 

All three of these rookies have seen better days. No one said that investing in IPOs would be easy. However, with double-digit growth and gaining ground in important online industries, we're at compelling entry points for risk-tolerant investors.

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Stocks Mentioned

Revolve Group, Inc. Stock Quote
Revolve Group, Inc.
$26.31 (1.54%) $0.40
The RealReal, Inc. Stock Quote
The RealReal, Inc.
$2.51 (0.80%) $0.02
DouYu International Holdings Limited Stock Quote
DouYu International Holdings Limited
$1.25 (4.35%) $0.05

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