The year 2020 has been incredible for initial public offerings (IPOs) in the technology sector, and December is shaping up to be a massive month for companies making public market debuts. Tech companies worth more than a combined $100 billion will be issuing their first publicly traded stock this month, according to England's The Telegraph, and investors will have a chance to build ground-floor positions in potentially explosive companies.
Read on for a look at three IPO stocks that stand out as intriguing long-term investments: one that's recently made its market debut, and two others that are on track to hit the market in December.
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1. FuboTV
FuboTV (FUBO 1.46%) is a sports-focused streaming entertainment company that had its initial public offering on the New York Stock Exchange (NYSE) in October. Shares have already climbed roughly 170% from the company's debut at $10 per share, but the stock could blow past its current price range.
The company's core streaming business generates sales from both subscriptions and advertising, with paid subscriptions accounting for the majority of revenue. Rather than taking the low-cost, pared-down approach employed by many other "skinny bundle" streaming services, the company's base package offers an expansive collection of sports content from over 110 different national and regional sports channels in a $65 per month subscription service. Users can also pay to upgrade and gain access to even more content.
Sports content remains one of the biggest draws in the entertainment world, and Fubo's service bundling game broadcasts from major leagues including the NFL, NBA, and MLS is a great package for enthusiasts and is adding members at a rapid clip. The company ended its third quarter with 455,000 subscribers, up 58% year over year. Overall revenue in the quarter rose 71% year over year on an adjusted basis, with streaming subscription revenue up 64% compared to the prior-year period and advertising revenue soaring 153%.
Fubo is also expanding into the online sports-betting space and recently purchased online-gambling specialist Balto Sports to accelerate the initiative. Combining its growing audience of dedicated sports enthusiasts with an online gambling platform is an intriguing prospect that could turn into a huge growth driver.
With the company valued at roughly $1.8 billion and trading at about 7.3 times this year's expected sales, FuboTV is a young business with a growth-dependent valuation. On the other hand, a premium sports streaming package could prove to be a disruptive service in the pay-TV space, and the integration of an online betting platform presents additional paths to growth.
2. Airbnb
Airbnb has already been disrupting the hotel and short-term property rental markets for years, and investors will soon have a chance to build a position in the potentially explosive business. An official date for the company's public market debut has yet to be announced, but it's on track to happen this month, and it will likely wind up being one of the year's biggest IPOs.
If you're not familiar with what Airbnb does, the company provides an online platform that connects users seeking rental accommodations with property owners. Renters using the platform can often find places to stay that are both nicer, less expensive, and more convenient than comparable hotels in nearby areas. Owners can flexibly rent out homes, apartments, and rooms that aren't in use. This incredible combination helps explain how the platform has grown so quickly.
As someone who has used the company's service a lot over the last five years and surveyed opinions from other renters and property owners, I think the platform provides great value. I also think that investors who buy the stock early will enjoy fantastic returns over the long term.
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Airbnb makes a substantial commission (paid by both owners and renters) on each stay, yet it's still able to list highly competitive prices compared to the traditional hospitality industry. The company's core business enjoys very high gross margins for how much revenue it's capable of generating, and it has the potential to be hugely profitable as the need for sales and marketing spending decreases and revenue expands. Playing the middleman role between owners and renters looks to be a very lucrative long-term business model, and Airbnb has already established itself as the market leader in the U.S. and Europe. The business also has tremendous room for growth in other international markets.
The company will price its stock between $44 and $50 per share, valuing the company at roughly $35 billion at the upper range, and the stock will list on the Nasdaq under the ticker "ABNB." Airbnb's stock is set to list on Thursday, Dec. 10, and it will likely explode out of the gate, even with coronavirus-related pressure putting a damper on its business this year. And I'm aiming to buy shares as soon as they are available on the market.
3. Roblox
Roblox is a software company that operates a video game platform of the same name, and it could post stellar growth over the next decade. The Roblox platform is already one of the most popular games in the world and functions sort of like a social, online version of Legos. Creators are able to craft worlds and scenarios for other users to experience, and the game has become a go-to digital meeting place for many young people.
The company estimates that approximately 75% of children in the U.S. between the ages of nine and 12 play Roblox, and the platform boasts an impressive 31.1 million daily active users. The business primarily makes money through subscription and in-game currency sales, with these products being used by players to unlock new items and experiences in the vast and varied digital universe. Creators also buy in-game currency to create new worlds and scenarios.
The company managed to post $1.2 billion in bookings across the first nine months of this year -- up 171% compared to the same stretch in 2019. Revenue across the comparable nine-month periods rose 68% year over year to reach $589 million, and growth would have been even more impressive if the company's accounting didn't realize bookings as sales across a three-year period. Coronavirus-related conditions boosting engagement for digital services undeniably played a big role in the stellar performance this year, but the Roblox platform has proven it has staying power and can drive fantastic engagement.
Roblox is on track to go public sometime this month with a listing on the New York Stock Exchange under the ticker "RBLX," and it's set to hit the market with a starting valuation in the range of $8 billion. The company's platform is posting eye-catching growth, and investors are eager to capitalize on the video game industry's momentum, so it wouldn't be surprising to see Roblox's valuation level up quickly.
