More companies had their initial public offerings (IPOs) on the U.S. stock market last year than any other in history, and a staggering number with recent market debuts posted fantastic gains out of the gate and in subsequent trading. IPO stocks have been incredibly hot of late.

While investors may want to exercise some general caution amid the IPO fervor, there are promising stocks in the recent IPO class that will likely go on to deliver strong performances over the long term. Read on to get the rundown on three top IPO stocks to buy early in 2021. 

1. Unity Software

Unity Software (NYSE:U) is a company that had its initial public offering in September and is best known for its video game development tools. As a visual development language and interface, Unity offers software developers a streamlined and simplified way to create visually focused programs.

Outstretched hand holding a line moving up, stacks of coins, and blocks spelling "IPO"

Image source: Getty Images.

With a market cap of roughly $39 billion, valuing the company at about 41 times this year's expected sales, it's not unfair to question whether Unity's stock has climbed too fast for a simple video game engine provider. On the other hand, the company has other avenues to big growth. 

There's a good chance that Unity's services will see adoption outside of the video game space. To put that potential in perspective, it's helpful to look at what NVIDIA has been able to accomplish.

NVIDIA's core business has long revolved around graphics processing units (GPUs) specifically tailored for high-end gaming applications. However, the company's sales outlook and stock performance eventually exploded as demand for high-performance GPUs to support emerging technologies -- including data centers, machine vision, and artificial intelligence -- transformed the business.

While the comparison is different in some respects because Unity is operating in the software space, Unity is already seeing growth outside of gaming, and the company has a clear path to continued expansion in other areas. Augmented reality has the potential to be one of the defining technologies of the next decade, and Unity's relatively easy-to-use tools for crafting real-time 3D content could make it one of the emerging medium's biggest winners. 

2. ContextLogic 

E-commerce has never been bigger, but growth for online retail is still in its early days. ContextLogic (NASDAQ:WISH) is the parent company of Wish, a budget-focused e-commerce platform that looks poised to benefit from its specialized focus and momentum for the broader industry.

Wish has roughly 100 million monthly active users on its platform and 500,000 merchant partners.Mobile data tracker Sensor Tower reports that Wish was the most downloaded mobile shopping application in 2017, 2018, and 2019. While the tracker has yet to release its official tally for 2020's most-downloaded apps, a survey shows that Wish posted big growth last year as well.

ContextLogic shares trade around $20.50 per share, significantly below the $24 IPO price that the company listed at in December. Wish actually had the worst opening performance of any billion-dollar U.S. IPO in 2020, according to data compiled by Bloomberg, but the relative underperformance actually presents an opportunity in this case.

The business is posting encouraging sales growth, with revenue climbing roughly 32% year over year across the first nine months of 2020. Convenient access to affordable goods is going to play a huge role in the growth of global e-commerce, and ContextLogic is already delivering on that front. The company has carved out an appealing niche in online retail, and its stock looks poised to deliver impressive returns for patient shareholders. 

3. PubMatic

Companies including Facebook and Alphabet have built tech empires on the strength of growth for digital advertising and the ability to offer superior ad targeting compared to legacy channels. However, the digital advertising revolution is still just getting started, and there's room for other innovators to make big gains in the space.

Stocks like The Trade Desk (up 188% over the last year) have enjoyed stellar performance as businesses have pushed to make their advertising dollars go farther. PubMatic (NASDAQ:PUBM) is a smaller player in programmatic advertising, but it could have a long runway for growth ahead and deliver strong performance for investors. The company had its initial public offering at the end of November at about $20 a share, and the stock now trades down roughly 5% from the closing price on the day of its public debut. 

Pubmatic uses its cloud-based software platform to process ad impressions and connect viewers with advertiser bids. It also uses its rapid-fire analytics platform to give advertisers quick feedback on whether their campaigns are working and whether a different approach or target audience might deliver better results. 

The growth of the overall internet heavily hinges on the growth of the digital advertising market, and this trend will only continue as more commerce is conducted through online channels. The advertising industry has been pressured by the coronavirus pandemic, but these pressures will eventually start to ease and lead to a more favorable operating backdrop for PubMatic. 

With a market cap of about $1.3 billion and a forward-price-to-sales ratio of roughly 8, this is a small company that has room for dramatic growth. PubMatic isn't yet a top dog in programmatic advertising, but at current prices, its stock could be one of the space's biggest winners.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.