Contributor, Benzinga
September 3, 2021
$11.68
-0.05[-0.43%]
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Open-Close-Vol / Avg.0 / 1.245MMkt Cap2.195BDay Range- - -52 Wk Range6.890 - 15.680

In many cases where you end up needing an attorney, something has not gone according to plan. But it’s important to realize that mitigation of unfavorable circumstances represents just one aspect of legal services. Psychologically, people tend to remember negative experiences more acutely than positive ones; hence, the process of seeking legal advice makes many consumers feel uneasy.

At its core, LegalZoom focuses on accessibility, connecting its customers with affordable legal services related to dispositional documentation for personal and business matters.

As you might imagine, the legal services sector in the U.S. is incredibly lucrative. Prior expert forecasts projected industry revenue to consistently generate above $344 billion between 2020 through 2024. Undoubtedly, the lion’s share of this tally stems from big corporate expenditures. But filling a need for administrative legal services is also the beauty of LegalZoom, which primarily aims to democratize legal services by drawing up — for a nominal fee — documents like wills, incorporations and trademarks but without expensive attorneys.

Accessible personal and professional services represented a relevant business prior to the COVID-19 pandemic. As the world emerges from the pandemic, many people are likely to be much more cognizant of their mortality, increasing demand for wills. Indeed, LegalZoom’s financial performance suggests that this dynamic already is playing out. For instance, in 2020, the company generated revenue of $470.6 million, up more than 15% from 2019’s tally of $408.4 million.

Unlike most of the aspirational public market debuts that launched during the trailing year, LZ stock undergirds a profitable business. From LegalZoom’s S-1 filing with the SEC, it posted net income of $7.44 million in 2019, followed by $9.9 million in 2020. Also noteworthy is that goodwill is less than 5% of total assets, which indicates that most of the company’s assets are tangible or material items.

While the legal services industry isn’t the most enticing business sector, it’s a vital one. Therefore, investors shouldn’t be surprised if LZ’s IPO manages to surprise onlookers. First, access to legal solutions imposes steep pressure on households. Many attorneys charge onerous retainers — the upfront cost required to get the ball rolling — and no guarantees of outcome exist in the legal environment. At least with LegalZoom’s core businesses, customers know they will receive the documents they paid for.

Second, the aftermath of the COVID-19 pandemic incentivized families to cover their legal bases. As briefly mentioned earlier, the SARS-CoV-2 virus sparked a wake-up call for many Americans, particularly older ones, to get their affairs in order. With a will, the process of bequeathment is much more streamlined, helping to avoid unnecessary obstacles for loved ones.

Third, the public health crisis likely catapulted a paradigm shift in the business and professional markets. As The New York Times reported last year, the mass-scale telecommuting experiment made many workers realize that they want to maintain the benefits of remote operation once the pandemic is over. However, it’s improbable that employers will continue to pay full salaries for partial benefits. Thus, many people may decide to branch out on their own, which may require legal documentation and consultation.

Finally, LZ stock may have the biggest ace up its sleeve in brand recognition. Over the years, LegalZoom invested heavily in its advertisements and commercials. In addition, the company leverages an intensive portfolio of articles covering a wide range of legal topics. 

Regarding the traditional IPO process, virtually all underwriters shut out retail investors from purchasing shares at the initial offering price. While this circumstance sounds harsh, the reality is that underwriters only have a limited number of shares to sell. Therefore, for pure profitability reasons, they extend pre-IPO stock purchase benefits to their choicest customers, typically institutional investors.

But you don’t have to be discouraged as a retail buyer. For one thing, institutional clients must buy into every IPO underwriters offer to them — there’s no picking or choosing here. And the process of buying IPO shares at the open is easy, especially if you already know how to buy stocks. If you don’t, just follow the below steps.

Step 1: Pick a brokerage.

Back before trading on your smartphone became a commonplace activity, brokerage services varied greatly in their pricing. But as competition increased in both the online and mobile markets, the brokerage industry standardized most of the financial incentives to join, such as commission-free trading.

Thankfully, this development allows you to focus on your needs and preferences when deciding on a platform. To help you in your research, below is a list of best brokers to consider.

Step 2: Decide how many shares you want.

While many financial resources overlook this step, it’s actually very important to decide on your share count, preferably before placing your order. Higher share counts allow you to accrue more profitability if the target stock rises in value. However, the opposite is also true, so give some thought to your share count as it represents your risk-reward profile.

Step 3: Choose your order type.

Before placing your 1st trade, you should familiarize yourself with these concepts.

  • Bid: The bid is the highest price a buyer will extend. It is always lower than the ask.
  • Ask: The ask is the lowest price that a seller will take. It is always higher than the bid.
  • Spread: The difference between the bid and ask, the spread provides underlying details about market liquidity and risk. Narrower spreads imply higher liquidity and lower risk because of ample buyer availability. Conversely, broader spreads indicate lower liquidity and higher risk.
  • Limit order: Use a limit order to trade stock at a specific price. Keep in mind that the market might not execute your order, leaving it hanging unfulfilled.
  • Market order: Use market orders to buy shares at the current rate. Note that buy orders execute on the ask and sell orders on the bid, which are terms that are least favorable to you.
  • Stop-loss order: Stop-loss orders exit you out of your position at a predetermined (requested) price or the next available price, whichever circumstance comes first. Beware of gap-down sessions, which may cause your stop-loss order to fill well below your requested price.
  • Stop-limit order: For complete control of your protective orders, use a stop-limit order to allow only automated exits to execute at a specific price. But like limit orders, placing a stop-limit does not guarantee execution.

Step 4: Execute your trade. 

To execute a market order, follow these steps:

  1. Select action type (buy or sell).
  2. Enter the shares you want to acquire (or sell).
  3. Hit the Buy (or Sell) button.

Limit orders follow the same steps above, with the exception that you must enter your desired execution price.

Acquiring the appropriate documentation can be the difference between facilitating a smooth process for your final affairs or leaving your loved ones an administrative mess to resolve. Additionally, receiving the right counsel regarding a business matter can be worth its weight in gold.

Frustratingly, the legal services industry tends to charge exactly that, even for relatively mundane requests. That’s where LegalZoom gets to work, providing personal and professional documentation without the usual costs associated with them. Because demand for legal products should increase in the post-COVID environment, LZ stock offers upside potential.

About Joshua Enomoto

His distinct writing style of distilling convoluted data into relatable and compelling narratives has earned him recognition among several investment-related publications.