A lot of recent IPOs have buckled below their original price tags, and last month, I took a look at some of this year’s discarded rookies that should bounce back in 2020. Now it’s time for me to go back a year and size up the 2018 IPO class to see which broken offerings have the potential to turn things around…
Upwork (NASDAQ:UPWK) and Dropbox (NASDAQ:DBX) are two of last year’s debutantes that I can see cracking their IPO price ceilings next year. It goes without saying that when you invest in IPO stocks, you should be willing to take on a fair amount of risk, but let’s go over why these out-of-favor investments have what it takes to recover in 2020.
Upwork: Down 17.9%
It’s been 13 months since Upwork hit the market at $15, and while the leading online marketplace for freelancers would go on to open at $23 and peak at $25 in the springtime of this year, the shares have fallen to the low teens after a poorly received third-quarter report last week. Upwork is still growing. Revenue rose 23% in its latest quarter, and its take rate — the percentage of gross services volume that it keeps by matching up freelancers and contractors with companies looking for specialists — is on the rise. Adjusted earnings also came in ahead of Wall Street expectations.
The rub for Upwork in last week’s report was its guidance. It sees revenue growth slowing to between 17% and 18% in the current quarter. After back-to-back quarters of accelerating growth, we’re seeing Upwork lift its foot off the pedal. The midpoint of its full-year guidance also moved slightly lower, and that’s never a good look. The upside for Upwork is that it’s in the right place at the right time as a primary matchmaker for the gig economy.
Dropbox: Down 10.2%
One of the cardinal rules of going public is that you shouldn’t disappoint investors out of the gate. The provider of cloud-based storage solutions seemed to be living up to the hype when…
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