The markets have been fairly quiet, with the S&P 500 trading flat over the past 12 months. However, investors still have an appetite for hot IPOs, and the tech industry recently welcomed several solid new performers. Let's take a closer look at the three top-performing tech IPOs of the past year: Cyberark (CYBR 0.52%), Fitbit (FIT), and Hubspot (HUBS -1.54%).
Israeli cybersecurity company Cyberark priced its IPO at $16 last September, and shares nearly doubled to $30 on the first day of trading. Since then, shares have doubled again to over $60.
It has been a banner year for cybersecurity firms -- shares of Palo Alto Networks and FireEye have enjoyed similar outstanding gains. That growth was attributed to the surge of devastating data breaches across various industries. Their misfortune meant more business for CyberArk, which shields individual accounts and sensitive data with three core security products.
Unlike many of its industry peers, Cyberark is profitable. Last quarter, the company beat Wall Street estimates on both the top and bottom lines. Revenue rose 70% annually to $36.4 million, exceeding expectations by nearly $4 million, and GAAP net income soared 308% to $4.9 million. Non-GAAP net income rose 175% to $6.6 million, or $0.19 per share, beating estimates by 13 cents. Cyberark also boosted its full-year revenue and earnings beyond consensus estimates. Those are solid growth figures, but Cyberark stock is far from cheap at 125 times earnings.
When fitness device maker Fitbit went public in June, investors flocked to the stock and bid it up from $20 to nearly $30 on its first day of trading. The stock has since rallied another 45% to the $40 range.
Last quarter, Fitbit sold 4.5 million fitness bands and activity trackers, up from 1.7 million units a year ago. Total revenue rose 253% to $400 million, topping estimates by nearly $81 million, while GAAP net income improved 20%. Non-GAAP net income rose 180% to $51.3 million, or $0.21 per share, crushing estimates by 13 cents.
Fitbit also raised its full-year revenue and earnings guidance well past consensus estimates, but the stock has stumbled over 20% since the earnings release. This was likely due to two factors. First, gross margin slipped to 47% from 52% a year earlier, as operating expenses soared 253% to $108 million. This raised concerns that Fitbit might need to slash prices and raise marketing expenses to defend itself against cheaper rivals. Second, the stock is still fundamentally pricey. Even after its post-earnings dip, Fitbit still trades at over 50 times earnings.
Hubspot, which sells a sales and marketing platform, went public last October for $25 per share. The stock has since rallied over 85% to the mid-$40 range, thanks to strong demand for its digital marketing services.
Hubspot's main goal is to help businesses get seen online, generate new leads through marketing channels, and convert those leads into paying customers. Last quarter, Hubspot's revenues rose 58% annually to $42.9 million, topping estimates by $2.85 million. Its non-GAAP net loss narrowed from $7.1 million in the prior year quarter to $5.7 million, or a loss of $0.17 per share, exceeding expectations by four cents. Those numbers were solid, but Hubspot experienced a big management shakeup prior to that report. The company fired its CMO over ethical breaches, while its content vice president resigned over similar issues. CEO Brian Halligan was subsequently sanctioned over failing to report their behavior in a timely manner.
But looking ahead, Hubspot hopes that its new CRM system will generate higher subscription revenues. Hubspot's main marketing platform was already integrated with CRM leaders like Salesforce.com, but its own CRM platform has the potential to reach customers who don't use those providers. Hubspot is an interesting growth stock to watch, but it also isn't cheap at 11 times sales, compared to the industry average of 3.4 times sales for the application software industry.
Do your homework
These three stocks all had strong returns over the past year, but investors should remember that past growth doesn't guarantee future returns. All three stocks are considered fundamentally expensive, so investors should fully understand the risks and rewards before buying any shares.