Shares of recently public tech names have all rallied this week, but the broader trend is that investors are clearly separating out the wheat from the chaff, as TheStreet predicted not long ago.
Shares of Uber (UBER) , Lyft (LYFT) , PagerDuty (PD) , Tufin Software Technology (TUFN) , and Zoom Video Communications (ZM) were all higher Wednesday and Thursday, and though Pinterest (PINS) struggled on Wednesday, it, too, rallied on Thursday.
The trend, however, shows a a separation: the big consumer names, Uber, Lyft, have traded down, while the more focused B2B companies — Tufin, Zoom and PagerDuty — have soared. Pinterest, meanwhile, which appears to be much closer to profitability than either Uber or Lyft, has seen more modest stock gains than those three more focused names.
As of Thursday, Uber’s just a little above last Friday’s closing price of $41.57, its first day of trading, at $42.23. At this level, Uber is still below its offer price of $45, so people who bought the IPO outright are still in the red.
Even worse, Lyft is still down 30% from its March 29th debut, and is down 24% from its offer price.
In the case of Zoom, PagerDuty and Tufin, they’re adding to gains since the offering, and are up sharply on Thursday.
Zoom, which came out April 18, is up an even more impressive 39% with Thursday’s 8-point gain, and it has more than doubled from the offer price.
Even more impressive, PagerDuty is up 50% from its April 11 debut, and has also more than doubled from the offer price. Tufin, which went public the same day as PagerDuty, is up 24% since then, and is up 71% from the offer price.
Zoom, PagerDuty and Tufin are all what you would call application software vendors, focusing on, respectively, video conferencing tools, business workflow tools and security software.
Although not as bad as Uber and Lyft, Pinterest, the photo-sharing site, has lagged the three software stocks. It is up 19% since April 18th, the same day as Zoom, and up 53% from its offer price.
It would seem, then, that investors are selecting technology that has very tangible, immediate application to business problems, more so than consumer-focused Internet applications that are losing massive amounts of money but with the potential of becoming huge businesses down the road.
Note that the disparity in performance is out of alignment with the mix of views among sell-side analysts on these various names. Uber, for instance, has the equivalent of three out of six ratings shops giving it the equivalent of a “Buy” rating, while Zoom only gets two out of its 10 ratings so positive, with one analyst, Jonathan Kees with Summit Insights Group, rating it a Sell.
The results so far bode well for focused debuts such as Slack Technologies, which filed an amended prospectus on Tuesday, under the ticker “SK.” Slack, which sells software that lets teams within companies communicate in ways that go beyond email, is planning a “direct listing,” meaning that its offering will not be underwritten by an investment bank.
The results bode less well for big, ambitious offerings to come, such as Airbnb, the apartment-sharing startup, which hasn’t filed paperwork yet.
Somewhere in the middle is WeWork, the manager of shared working spaces in office buildings that is losing money on an Uber-like scale. Although it filed its offering paperwork confidentially with the Securities & Exchange Commission last month, it did disclose Wednesday that it lost $264 million in the March quarter, as sales more than doubled to $728 million. But WeWork also said that it has formed a new company, called ARK, which will buy properties outright, rather than lease them. ARK will then let WeWork lease the properties.
That $2.9 billion investment fund might make WeWork feel more like a big property manager, such as Vornado Realty Trust (VNO – Get Report) . And that familiarity could make investors more comfortable with the long-term prospects of WeWork because it feels like something they already know.
A lot can change with the next earnings call for these newly public companies, however. Lyft’s first report, on May 7, was the first test, and it didn’t go particularly well. The company exceeded revenue estimates but missed on the bottom line, sending the shares reeling at the time.
Pinterest is next up, with its earnings report due on Thursday after the market close. They will be followed in a couple of weeks by PagerDuty and Zoom, on June 6. Tufin’s earnings call is not yet set, nor is Uber’s.
Some momentum in Thursday’s Pinterest report could conceivably warm sentiment for Uber and Lyft, as fellow consumer enterprises, though it’s less than certain. Pinterest has a fairly straightforward advertising model, whereas the vast investments by Uber and Lyft are an effort to build and maintain a new market for “sharing” of assets.
The big question for the latter two, as indicated in TheStreet’s coverage of the Uber IPO, is whether at some point Wall Street will re-appraise the vast amount of data analysis that both companies are performing. That hive of data, gathered from riders and drivers, a kind of model of the way that assets such as vehicles operate, could potentially be valuable in and of itself, though it’s not yet clear what value, exactly, it should carry.
