Beware of These 3 Recent IPOs That are Overvalued

For the first half of this year, initial public offerings (IPOs) hit record highs, totaling $171 billion and surpassing the IPO boom of 2020. A loose monetary policy primarily drove the boom. However, a speculative rush by investors drove corporate valuations significantly higher. And the IPO trend is…

not expected to slow anytime soon. Frontier markets investment bank Renaissance Capital anticipates the year will end with 400 traditional IPOs and 600 SPACs.

However, investing in IPOs can be risky due to a lack of historical data on some companies listing the stock for the first time. Also, the Fed intends to reduce its monthly bond purchases later this month, marking its first step in pulling back its monetary support efforts. The central bank’s bond-buying is expected to decline by $15 billion each month. In addition, supply chain worries persist, driving high and persistent inflation concerns. These factors could adversely impact the performance of many recently listed stocks.

Recently listed stocks Amplitude, Inc. (AMPL – Get Rating), Dutch Bros Inc. (BROS – Get Rating), and Tyra Biosciences, Inc. (TYRA – Get Rating) look overvalued at their current price levels. So, we think it could be wise to avoid these stocks now.

Amplitude, Inc. (AMPL – Get Rating)

AMPL, in San Francisco, is a digital optimization system provider that  analyzes customer behavior with digital products. Its offerings include Amplitude Analytics, Amplitude Recommend, Amplitude Experiment, and Amplitude Behavioral Graph. The company went public in a direct listing of its Class A common stock on September 28, 2021.

On November 10, AMPL announced the opening of a data center in Frankfurt, Germany. The center is aimed at supporting the company’s customer base in the European Union. However, it may take some time for AMPL to realize gains from this increased operational capability.

On November 9, the company declared its partnership with data cloud company Snowflake Inc. (SNOW). Through the partnership, SNOW intends to leverage AMPL’s Digital Optimization System to unlock actionable insight for SNOW customers. However, the income from this venture may be stretched over a long period.

In terms of forward EV/Sales, AMPL is currently trading at 51.57x, which is 1,084.4% higher than the 4.35x industry average. Its 54.02 forward Price/Sales multiple is 1,143.9% higher than the 4.34 industry average.

For its fiscal third quarter, ended September 30, AMPL’s total operating expenses climbed 225.3% year-over-year to $68.26 million. Its non-GAAP loss from operations rose 228.8% from the prior-year quarter to $2.29 million. Its non-GAAP net loss and non-GAAP net loss per share increased 134.8% and 66.7%, respectively, from the same period last year to $2.08 million and $0.05. And analysts expect AMPL’s EPS to remain negative at least until the next year.

The stock has declined 9.1% in price over the past five days and 11.9% intra-day, to close yesterday’s trading session at $74.72.

Dutch Bros Inc. (BROS – Get Rating)

BROS is a Grants Pass, Ore., company that operates and franchises drive-thru shops. The company’s offerings include cold and hot espresso-based beverages and cold brew coffee products. BROS went public in a traditional IPO process on September 15, 2021.

On September 22, the company announced an offer for its customers on the Dutch Bros app in which 100 winners would receive free drinks for a…

 

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