Did Alibaba, Box And Fitbit Peak At Their IPOs?
"Previously, an IPO event would signal the growth phase of the company," Global Equities Research analyst Trip Chowdhry told Benzinga. "Today IPO signals the peak of the company."
Chowdhry said that a lot of junk has been thrown at institutional investors. He said there is a limit to the belief that the public markets will bail out private investors.
"Think about it: it's [only] a matter of time [before] all these recent IPOs will probably go down," he said. "Some have and some are about to. You can look at a few examples: Alibaba -- IPO was [the] peak. Look at Box -- all the way down."
Chowdhry referred to Etsy Inc (NASDAQ: ETSY) as a "hyper-inflated stock." The company has lost more than 40 percent of its value since its public debut in April.
GoPro Inc (NASDAQ: GPRO), another company on Chowdhry's list, has been on the rise since March. However, it is still down nearly 10 percent year-to-date.
"These are stocks [with] IPOs that should have been priced at 1/3 or 1/4 [their value] so these companies could have earned their valuation and the stock would have gone up," Chowdhry explained. "You can see the data is very obvious. The IPO is the peak of these companies. We have to reflect on how wrong investors were in the public market."
Instead of buying into these struggling IPOs, Chowdhry thinks investors should focus on companies "with fundamental business strengths which ultimately were redefined." That list includes Oracle Corporation (NYSE: ORCL), Microsoft Corporation (NASDAQ: MSFT), Apple Inc. (NASDAQ: AAPL) and International Business Machines Corp. (NYSE: IBM).
"I would put Oracle in that space, Microsoft, Apple, and it's a little early, but I think the innovations in IBM are re-starting," said Chowdhry. "It could be another six months to a year before IBM reinvents itself. But those are the companies that are passionate about building businesses on the fundamentals, not on stories built on ether."
Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.
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