The business world is changing quickly in the age of digital transformations, and many tech companies have turned to public stock offerings to raise the funds they need to power their further growth. Last year saw 480 companies conduct initial public offerings (IPOs) on the U.S. stock market -- more than any other year in history and a 106% jump from 2019's tally.
Last year also saw a record-setting number of IPO stocks double their prices on their first day of trading -- indicating that the market currently has a big appetite for promising young companies that can tap into the latest growth trends. While investors should avoid buying IPO stocks solely on hype, building early positions in some of these companies will likely yield impressive returns.
Read on for a look at three IPO stocks worth buying in February -- one that's set to hit the market this month, and two that recently made their public debuts.
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1. Roblox
If you know anyone with school-age children, there's a good chance these young people are familiar with Roblox. If you're not personally familiar with the video game, think of it as being similar to a software-platform version of Legos. Roblox is enormously popular, and Roblox the company has big growth potential.
Its hugely successful video game is also a portal for a wide range of different user-generated content. There are new games and experiences being created in Roblox all the time. Creators (who are also game users) can make new worlds, characters, and items in the game's universe, and they'll receive payments based on the level of interaction other users devote to their content. With its large userbase and its system for encouraging ongoing content creation, Roblox has real room for growth as a social software platform.
Roblox management estimates that roughly three-quarters of U.S. children between the ages of 9 and 12 play on its platform. Management has also estimated that roughly half of Americans under 16 interact with its software. When the game maker filed its IPO prospectus back in November, the company noted that it had roughly 31.1 million daily active users and 150 million monthly active users, and it looks like the platform will continue to attract new players and creators, and encourage more in-game spending.
Roblox was planning to have its initial public offering in December, but it wound up delaying the move amid a frenzied end-of-year IPO market and questions from the Securities and Exchange Commission about how the company records revenue from the sale of in-game currency. Now, it looks like the game maker is on track to go public this month on the NYSE using the ticker RBLX via a direct listing. Once it does, Roblox has the potential to be one of 2021's hottest stocks.
2. Airbnb
Airbnb (ABNB 1.20%) hit the market in December, and the short-term travel rental company wound up having the biggest IPO of the year. The industry innovator surged past the $47 billion valuation implied by its listing price and hit a market capitalization of over $100 billion on its first day of trading.
The stock is now up roughly 27% from its closing price on the day of its IPO. The company's shares have seen some substantial swings so far, and its near-term business performance will be shaped in part by the coronavirus pandemic, but Airbnb still has plenty of room for growth over the long term.
Airbnb has already reshaped the travel rental and hospitality industries, and the business is proving surprisingly resilient amid the pandemic. The company substantially reduced its employee count in the first half of 2020 to minimize expenses, and a consumer-level pivot from interstate and international travel to local-area rentals helped sustain engagement on the platform.
When pressures from the coronavirus pandemic start to recede, there's the potential for a real boom in travel. After roughly a year of restrictions, lockdowns, and social-distancing conditions, people will likely be looking to get away from home. Airbnb has a great brand and has already solidified itself as a leader in the hospitality space, and it will continue shaping the future of travel.
3. ContextLogic
ContextLogic (WISH 0.34%) is aiming to accelerate the online retail revolution in markets where it's not as far advanced. The company operates Wish -- an e-commerce platform with a focus on low-price goods that has intriguing potential for expansion.
If, for example, you're looking for a pair of wireless headphones but don't want to shell out a lot for a premium brand, Wish offers an array of low-price, off-brand alternatives. The same could be said if you're looking for clothing, jewelry, or other accessories. People love finding great deals, and ContextLogic's e-commerce site combines a broad selection of affordable items with a mobile-centric shopping experience that encourages users to discover new products.
Bargain-focused shopping has plenty of appeal and room for growth in the U.S., but affordability will likely play an even bigger role in driving e-commerce growth where per-capita income is lower. Wish has been one of the most-downloaded shopping apps over the last four years, and ContextLogic reports that the platform now has over 100 million monthly active users in over 100 different countries.
ContextLogic stock is up roughly 25% from the $24 per share price the company listed at in December, but shares still offer big upside potential as the growth of the global e-commerce market unfolds.
