Still largely untouched by the cloud software movement, the real estate industry is ripe for disruption. That means software outfit Latch -- soon to go public through a merger with SPAC TS Innovation Acquisitions (NASDAQ:TSIA) -- has massive growth potential as it helps upgrade apartment and commercial properties for the 21st century. After the company reported a fantastic start to 2021, I plan on doubling up on my small stake in the month of May. Here's why.

Going from zero to 100

Latch reported booked revenue (revenue under contract but not yet earned) and net revenue of just $167 million and $18 million, respectively, in 2020. As Latch signs up new customers on contracts averaging six years in length, booked revenue will be an important metric to watch in 2021. The growth rate was "only" 49% last year as the pandemic put many construction projects on hold. 

A couple moving boxes into a kitchen.

Image source: Getty Images.

Latch is picking up the pace, though. Preliminary first-quarter financials were released at the end of April showing bookings growth accelerated to a range of 86% to 88% -- nearly double the full-year 2020 rate. Latch is also starting to earn some revenue from its contracts with early customers. Preliminary first-quarter sales are expected to be up 135% to 140% year over year, but bear in mind it's starting from basically nothing (remember, only $18 million in sales were realized last year). Latch has forecasted it will turn free-cash-flow positive in 2023 on full-year sales of $368 million. 

Nevertheless, while it's still early in the company's growth story, the report was good news for Latch shareholders (who currently own shares of the business via ownership of the TSIA SPAC). Latch said it expected full-year 2021 bookings to rise 84% in an investor presentation, so things are certainly off to a good start. Also of note, last year, only 44% of customers ordered more than one software module -- most of them for resident access software. But in the first quarter, the number of customers that bought more than one module also nearly doubled to an estimated 75% to 80%, expanding Latch's reach in modern apartment complexes beyond smart access to also include intercoms, smart home devices, and package delivery access.

A promising disruptor of the apartment complex operation status quo

Clearly, Latch is picking up some serious momentum, but this story is only just beginning. Bookings are on the rise, which means this software firm is increasing the likelihood it will have double-digit-percentage sales growth for years to come. 

The company is always expanding its portfolio of integrated products and services too. The Latch C2, a smart lock designed to be retrofitted onto doors post-construction, was released last quarter and quickly picked up 20,000 orders. AvalonBay Communities also partnered with Latch during the quarter to help prospective residents virtually schedule self-guided tours and access their prospective apartments in a new apartment community. There are limited variable costs that can be controlled in the real estate world, but the use case with AvalonBay illustrates how Latch can help property managers reduce ongoing operating expenses and provide a more flexible service experience for future and current residents. Put another way, Latch's integrated hardware and software platform can help increase revenue and decrease expenses for property owners, all while delivering a better living experience for renters. A win-win-win scenario like this points to lots of new customers signing on with Latch.

I think this cloud stock has a bright future ahead of it, and 2021 is off to a great start. Shares have been nearly cut in half from their highs in February, but I think investors will start to wake up to the incredible momentum Latch is starting to build. Latch is thus my top IPO stock to buy in the month of May ahead of a full first-quarter financial update.

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.