4 Overvalued Recent IPOs to Avoid in September

Last year was a great year for IPOs thanks to a low-interest-rate environment and the quick and low-cost listing options such as special purpose acquisition companies (SPACs). In total, 480 companies…

went public last year. The number has been even higher so far this year. According to Stock Analysis, there have been 742 IPOs so far this year.

However, the Federal Reserve could raise interest rates as early as 2023, and recently indicated its willingness to reduce asset purchases before the end of the year. In addition, Investors’ concerns over the economic recovery due to the resurgence of COVID-19 cases and high inflation could pose a threat to many recently listed stocks.

Investor optimism over recently-listed stocks Robinhood Markets, Inc. (HOOD – Get Rating), SentinelOne, Inc. (S – Get Rating), Full Truck Alliance Co. Ltd. (YMM – Get Rating), and Traeger, Inc. (COOK – Get Rating) has helped them reach price levels that don’t justify their recent financial performance and growth prospects. So, these stocks are best avoided now.

Robinhood Markets, Inc. (HOOD – Get Rating)

Zero-commission trade pioneer HOOD allows its users to invest in stocks, exchange-traded funds, options, gold, and cryptocurrencies via its platform. Its shares rallied to hit their all-time high of $85 on August 4, after falling 8% on its stock market debut on July 29, 2021. However, it has declined significantly since then.

HOOD’s revenue increased 131% year-over-year to $565.33 million for the fiscal second quarter that ended June 30, 2021. However, the company’s operating expenses increased 169% year-over-year to $500.73 million. In addition, its net loss came in at $501.66 million compared to a net income of $57.58 million in the prior-year quarter. Also, its loss per share came in at $2.16 compared to an EPS of $0.09 in the year-ago period.

In terms of forward P/S, HOOD’s 18.09x is 466.1% higher than the industry average of 3.19x. Likewise, the stock’s forward P/B of 70.21x is 6,129.2% higher than the industry average of 1.13x.

For fiscal 2022, HOOD’s revenue is expected to increase 36.9% year-over-year to $2.73 billion. However, analysts expect its EPS to remain negative in fiscal 2021 and 2022. The stock has lost 11.1% over the past month to close yesterday’s trading session at $41.95.

HOOD’s poor prospects are apparent in its POWR Ratings. The stock has an overall grade of F, equating to a Strong Sell rating in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

It has an F grade for Sentiment, Growth, and Value, and a D grade for Stability and Quality. Click here to see the additional grades for HOOD (Momentum). It is ranked #139 out of 147 stocks in the D-rated Software – Application industry.

Click here to check out our Software Industry Report for 2021

SentinelOne, Inc. (S – Get Rating)

Cybersecurity provider S’ Singularity Platform delivers artificial intelligence (AI)-powered autonomous threat prevention, detection, and response capabilities across an organization’s endpoints and cloud workloads, enabling seamless and automatic protection against a spectrum of cyber threats. Its shares surged 21% on its market debut on June 4, 2021.

S’ revenue increased 38% year-over-year to $45.75 million for the fiscal second quarter ended July 31, 2021. However, its non-GAAP operating expenses increased 114.7% year-over-year to $73.36 million, while its non-GAAP net loss increased 115.5% to $46 million. Also, its non-GAAP loss per share came in at $0.38 compared to $0.62 in the prior-year quarter.

In terms of forward P/S, S’ 94.45x is 2,186.2% higher than the…

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