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3 IPOs Investors Should Watch

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These young companies -- two that are already trading -- have bright futures.

Stock IPOs can be exciting for investors. Companies that have recently become public, or are preparing to go public, often show lots of promise despite having a limited track record for shareholders to analyze.

In this video clip from "The 5," recorded on Nov. 9, contributors Trevor Jennewine, Zane Fracek, and Demitri Kalogeropoulos name a few of their favorite recent or pending IPOs worth following today, Starlink, Roblox (RBLX 5.86%), and Joby Aviation (JOBY 4.96%).

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Trevor Jennewine: Thinking about companies that have either gone public recently or planning to go public in the near future. Each of you, let's talk about one that you were excited about and then explain why. Zane, we'll start with you.

Zane Fracek: I want to talk about Starlink as a company that could go public soon that I'm excited about and Coinbase as one that recently went public. Touching on the last question a little bit, why we wait.

Thing about both of these companies, it's going to be really tough for me to temper my expectations because a lot of times in the S-1s, like Rivian for example, they'll have these huge ambitions where we're going to have a charging network and energy storage as well and software. Part of me is like where is that all coming from because you want to believe it but then sometimes the realities of the opportunity might be a little bit water down from that, so I try to not discount the work required to hit all those goals.

That said, Starlink is one, there's rumors running around about it IPOing soon and I think Musk has said he wants to have this company IPO when it's profitable. But this is a company that you cannot discount the amount of work going into it because it's very risky. A lot of other companies have tried and failed at the same thing. That said, SpaceX has a whole different advantage given that they have the reusable rockets and they can really cut back on the cost of launches that way. But still, it's super capital intensive, you have to get the entire network up and running before you can start collecting revenue. Whereas most companies you can get the incremental revenue. There are rumors that this could be $60 billion IPO, which would be really interesting right there with Rivian.

The way this company works is they are charging $99 a month to consumer for Internet access basically and it's a lot of satellites all around the world beaming down the signals for Internet access and it's mostly targeting people that are not in densely populated urban environments. Because it's relatively cheap, unlike a per customer basis to give those customers access to Internet, but in rural environments where you need to maybe dig a giant path for a 5G cable or whatever it might be, it might not a lot of sense to get it there and only have 10 people ready to use it.

Looking into the future, Musk's hoping that they can get a market of $30 billion in revenue per year. I think that could be a bit of a pipe dream because that's about a quarter of Verizon's revenue, but same time, I don't like to bet against him because a lot of times what he says come true, just not in the right timeframe.

The other one I will touch on real quick is Coinbase. I think this one has been really interesting because it's been correlated with the movement of Bitcoin since its IPO and that's what kept me out. I like Bitcoin personally, but I didn't want more exposure through Coinbase where so much of its revenues were coming through that one coin. When it IPOed, I thought it was a little expensive. But it dipped down significantly like 30%, and now the news about the company is their new NFT platform.

I think that's going to be huge, it's going to take them more exposure to Ethereum and that ecosystem rather than a heavy reliance on the coin because that's where the trading volume is. This market that they are entering for NFT's could be or was $2.5 billion in sales just for this first half of 2021, which is up from only 13.7 million in the first half of 2022, it's just a massive jump. I'm keeping my eye on maybe Starlink hopefully in the future and maybe looking for an entry point into Coinbase.

Demitri Kalogeropoulos: Zane, that's cool. That's the first I'm really hearing a lot of Starlink, that is exciting, some of those numbers I'll be watching that one. The one that's on my mind today and I'm sure you can guess why is Roblox, ticker symbol RBLX. The stock is up over 40% today. That's pretty amazing and they just reported their third quarter earnings. I took a look at that this is the gaming it's interesting combination of gaming and social media platform, mainly for children, but they've got a growing audience in the adult range, 13 and older.

They went public in March at about $70 a share and I think the stock is definitely crossed over $100 today, I believe. Take a look at their earnings, engagement is the main thing that the company is prioritizing right now and that looks really good. Their daily active users were up 31 percent year-over-year based and that's on top of big growth before and that's 47 million daily active users. They had over 11 billion hours of interactions in the quarter that was up 28%. A lot of just good buy and buy content creators and people using the platform.

The monetization trends look pretty good. Roblox, but like I said, they're still focused on growth over that right now. They get start prioritizing earnings a little bit down the road once they get this massive platform, which it does seem like they're doing that. It's still in that category for me if just a little bit too early for me to jump into the stock. Having IPO just a couple of months ago, I still like the more established video game giants.

I can understand their business model a bit like Electronic Arts had a great quarter, Activision Blizzard had a good quarter but their forecasting is slightly tougher 2022. But look I like both of those brands and the video game industry is really could be attractive, I think, in general.

That's why I will be watching Roblox for a while. I wouldn't be surprised if the business has maintained this momentum for quite a while longer.

Jennewine: Yeah, Demitri. Roblox has been on my list too and I'm in the same boat. I'm not ready to jump in quite yet, but definitely a great day. Zane, Starlink, I'm excited about that too.

My company, I'm going to go a little bit more out on a limb here. I'm going to go with Joby Aviation. I'm mostly curious about this company. If you're not familiar with Joby, they are a first-mover in what they call the urban air mobility industry. They went public via SPAC back in August of 2020. They design, build these electric vertical takeoff and landing aircrafts. Just in case people don't know what I'm talking about, I'm going to through a picture up there real quick from Joby's Investor Relations page. These are the electric vertical takeoff and landing aircraft.

They've been building these prototypes for a little while doing test flights. They are in the process of getting certified for commercial operations through the Federal Aviation Administration. The company does not make any money right now. But they mentioned in their SEC filings that they are further along in the certification process than anybody else and they expect to be first to market with an aerial ridesharing service. They are planning to launch that in 2024. These aircraft, they can fly 200 miles an hour, carry four passengers. They're virtually silent, so Joby has plans to build sky ports in urban areas, places like Los Angeles, and then launch that ridesharing service. The flights would be up to 150 miles.

They'd connect places like Houston and Austin, or LA, and Newport. You bypass that sitting in grid lock and you can fly over everything straight-line air travel. It'd be a little bit more expensive. Management has mentioned they think they can have the price down to three dollars per passenger mile by 2026. But the real benefit is that it cuts the travel time by about a factor of five.

Then one other noteworthy thing is they already have a partnership with Uber. When they launch these aerial taxi services in a city, excuse me, the Joby service will be integrated into the Uber app. I'm interested in seeing where this company goes. Have either of you guys come across Joby at all?

Kalogeropoulos: It's the first I'm hearing of it, but it's really interesting. It reminds me of, I actually did a quick, I was in Beijing a few years and maybe 10 years ago, and I was just struck with how it was almost common. That city it just had so much money flowing into it.

It was very common for people to be using the Uber-rich, you might say, using helicopters to just go commute almost as a commuting thing. I just thought how crazy that is, but I can definitely see how that's something that overtime could be democratized a bit and not just some for the richest tenth of a percent of people

Jennewine: Yeah. Exactly.

Fracek: Trevor, I think you hit the nail on the head when in the terms that I've looked at this company, it's just been the curiosity. I'm like, what are they doing over there? Not really through the lens of an investor yet.

Jennewine: I'd say definitely, there's potential I've seen estimates that put the commercial opportunity about 74 billion by 2035, and if you add in military applications at the market opportunity is something over 600 billion, I think.

But they really hit on the fact that their aircraft, they're virtually silent when they're flying so they shouldn't really be a disruption to have them right in the heart of a major city. We'll see what happens.

Trevor Jennewine owns shares of Joby Aviation, Inc. The Motley Fool owns shares of and recommends Activision Blizzard and Roblox Corporation. The Motley Fool recommends Electronic Arts. The Motley Fool has a disclosure policy.

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