When a company has its IPO – or the first public offer – it is the first time ordinary investors have the opportunity to buy a small piece of the company. As I will cover below, it is not for everyone to invest in IPOs. Stocks of graduates can often soar or sink to dizzying levels during the first months of the market.
Take for example Beyond Meat . The company – which offers plant-based meat alternatives that are becoming increasingly popular in fast food chains – was released on May 2. Stocks began trading at $ 25. Less than two months later, they were topped $ 200. It's crazy – a $ 15,000 investment was worth $ 120,000 in a matter of weeks. We have to wait to see where the stock is going in the long term.
Of course, the early days are not always so rosy. Back then Facebook was published in 201
As you can see, stocks can be volatile right after they first start trading publicly. It can do to keep stocks in a newly developed warehouse that tries on nerves. In fact, we've talked a lot here at The Motley Fool about the dangers of investing on the first real trading day: Things can get so volatile that it's best to wait a few days or weeks to dive in.
And I am not a big fan of "big" buys on recent IPO shares either. These are companies that have limited operating history. Most people start kicking the tires. If you do not have a solid dissertation to invest in the stock, a set of calculations to test your task, and the conviction of keeping whatever the stock does, it is not for you.
But it doesn't. It doesn't mean you need to avoid having recently ordered shares. This is where I can help. Below, I will discuss five stocks that have been listed since January 1, 2017. For each one, I describe what the company does, why I believe it, and how to check to see if the company is delivering.
Equally important I have my own skin in the game: I own shares in all five companies.
|Company||IPO Date||What It Does|
|Octa (NASDAQ||April 2017||Helps businesses manage access to electronic documents.|
|Roku NASDAQ: ROKU)||September 2017||Provides a platform for all your streaming services.|
|MongoDB (NASDAQ: MDB)||September 2017||Enables enterprise databases and search opportunities.|
|Zuora (NYSE: ZUO)||April 2018||Offers billing solutions for subscription-based companies.|
|PagerDuty (NYSE: PD)||April 2019||Helps answer technical outbreaks on Websites and Servers|
Octa: Managing Identity in the Cloud
The cloud, or the global network of servers connected to the Internet, stores more vital data than we ever imagined And the large volume of such critical data – included things like your social security number, test results from health surveys and proprietary corporate information – will only increase. Secured access to these data is crucial, and this is where Okta comes in.
This is a SaaS company that helps companies manage which employees and customers have access to slider data. As you can see below, Octa's popularity is not relevant – especially among customers who are willing to hide more than $ 100,000 per year.
It is worth noting that the figures in the chart in 2019 only take into account the first three months of the fiscal year, which started February 1. Since 2015, the total number of customers has increased by 39% per year. More importantly – and impressively – the number of annual contracts over $ 100,000 has jumped 59% per year.
Octa has advantages from two wider moats that distinguish it from competitors. The first comes from high "switching costs." When a company starts using a standard Octa tool, such as single reminder or multi-factor authentication, it will rely on the service. Over time, customers start using multiple Okta tools to keep their data secure and give employees and customers access to data. All in all, Octa has 12 different products, but this number is sure to grow.
As customers add more Okta services and use them more, switching to an Octa competitor becomes difficult. Doing so can not only be economically costly, but will also require retraining of employees and recovery of data permissions across the board.
The best way to measure Octa's success is increasingly deeply embedded in the customer's DNA, is to monitor the company's dollar-based retention rate (DBRR). This measures the total income of a consort of customers spending from one year to the next. By filtering out the effect of new customers, we get an idea of whether customers live with Okta (DBRR near 100%) or even add more services (DBRR over 100%).
Here are the results so far.
As if that was not enough, Okta also goes "network effects": Each additional new user makes the service stronger for existing users. That's because the company uses "progressive" user profiling to ensure that people on the Internet are the ones they say they are.
This type of profiling requires artificial intelligence and machine learning (AI / ML). Things like AI and ML are much more powerful – and accurate – when they have more data to learn from. Each additional customer adds Okta's superiority in progressive user profiling, a fancy way of saying that the way Okta identifies users always changes as it gathers more data. This makes it much more difficult for the competition to pick up.
I think there is still plenty of room to grow. The company is worth $ 15 billion to investors today, but thanks to the dual moats and huge turnarounds of cloud computing, I think we could look back in five years and consider today's stocks to be a steal.
Roku: More Than You Know
Roku can be the only company on this list that most Americans are familiar with. The company sells a $ 30 USB plug that gives you access to all your streaming options from one interface on your TV. If you have a Netflix account, use Amazon for video rentals or Prime streaming, like watching PBS with kids, and jumping on YouTube when you're bored, you can do anything from Roku & # 39; s interface.
On the surface, this does not seem like a very good money profile. But much happens behind the scenes. Outside of the USB connectors – or TVs sold with the Roku platform – automatic installs – the company has three other revenue streams:
- If a Roku user signs up for a new streaming service, Roku gets a small cut on that subscription  Any purchase or rental of movies (like an Amazon rental) made on the Roku platform contributes slightly to Roku's revenue.
- If someone looks at ad-supported content using Roku, the company gets a cut on each ad serving.
The second element on that list is probably the least significant. The first item on the list may also seem weak, but we are about to see how it can change. Roku should meet 30 million customers by the end of 2019, and Disney will come out with their own streaming service later this year – available at Roku. If any of the 30 million subscribes to the Disney + service, it will appear on Rokus' income statement, although details are not clear on how big it will be.
But the most important contributor is the ad-supported revenue. If you look at YouTube or any other such service on Roku, every additional hour of viewing means money for Roku.
Three key metrics will help investors monitor how well Roku is making money from their growing user base: total accounts, hourly impressions (remember, more hours usually means more ads) and average revenue per account.
|Metric||Q1 2017||Q1 2018||Q1 2019|
|Accounts (millions)||14.1||20.8||20.8|| ] 29.1|