A record low-interest-rate environment led to a record number of IPOs last year, and the continuation of the Fed’s dovish stance helped more companies make their market debuts this year. According to a Stock Analysis report, there have been a record 1,053 IPOs this year, representing a 123.1% year-over-year increase.
This month, the Fed indicated that its run of ultra-easy policy might be coming to an end. However, according to an EY report, the 2021 fourth quarter was the most active fourth quarter for IPOs since 2007.
Amid this backdrop, recent IPO stocks Toast, Inc. (TOST) and Freshworks Inc. (FRSH) could be good additions to one’s watchlist. Wall Street analysts expect these stocks to rally more than 55% in price in the near term.
Toast, Inc. (TOST)
Boston-based TOST is a cloud-based, end-to-end technology platform that is purpose-built for the restaurant community. Its platform provides a suite of software-as-a-service (SaaS), products, financial technology solutions, including integrated payment processing, restaurant-grade hardware, and a broad ecosystem of third-party partners. Also, its shares soared roughly 56% in price on its stock market debut on September 22, 2021.
On November 16, TOST, at its restaurant innovation event, Spark, announced a slew of new products to address the challenges of accessing sales faster, managing takeouts profitably, delivering with third parties, and retaining employees. The new solutions will likely help restaurants to conduct their business more efficiently.
TOST’s revenue for its fiscal third quarter, ended September 30, 2021, increased 105% year-over-year to $486.40 million. The company’s annualized recurring run-rate (ARR) increased 77% year-over-year to $543.80 million. Its gross payment volume (GPV) came in at $16.50 billion, up 123% year-over-year. And its non-GAAP gross profit increased 75% year-over-year to $88.50 million.
Analysts expect TOST’s EPS and revenue for its fiscal 2022 to increase 65% and 37%, respectively, year-over-year to $0.43 and $2.30 billion. The stock has lost 16.5% over the past month to close yesterday’s trading session at $37.64. However, Wall Street analysts expect the stock to hit $60.11 in the near term, indicating a potential 59.7% upside.
Freshworks Inc. (FRSH)
FRSH, in San Mateo, Calif., is a software development company that provides SaaS products. The company offers solutions that enhance customer experience (CX), IT service management (ITSM), customer relationship management (CRM), sales and marketing, and human resource management. It was valued at nearly $13 billion on its stock market debut on September 22, 2021.
On November 11, FRSH introduced Freshstack, a CRM suite built to meet the needs of startups by unifying customer support, sales, and marketing teams. FRSH’s product bundle helps startups personalize marketing to generate pipelines, deliver omnichannel services, and grow faster at an affordable price point that is easy to deploy and manage.
For its fiscal third quarter, ended September 30, 2021, FRSH’s revenue increased 46% year-over-year to $96.60 million. The company’s net dollar retention rate came in at 117%, up 8% points year-over-year. And its annualized recurring run-rate (ARR) customers of more than $5,000 increased 31% year-over-year to 14,079.
For its fiscal year 2022, FRSH’s revenue is expected to increase 33.1% year-over-year to $488 million. Over the past month, the stock has declined 23.1% in price to close yesterday’s trading session at $29.45. However, Wall Street analysts expect the stock to hit $49.83 in the near term, indicating a potential upside of 69.2%.
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TOST shares were trading at $38.05 per share on Wednesday morning, up $0.41 (+1.09%). Year-to-date, TOST has declined -39.13%, versus a 26.33% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets. More...
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