Since the video-cam company GoPro began offering stock to the public last year, its share price has doubled. And shares of the gourmet burger chain Shake Shack more than doubled on the very first day that they debuted in January.
That doesn’t mean all so-called initial public offerings are bound for glory—some are destined to crash even if they start off strong—but another interesting lineup of likely IPOs awaits investors this year. They range from a Chinese company that makes smartphones and a fast-growing Brazilian airline to an online data-storage provider and a genetic-blood-testing company based in Redwood City, California.
Despite these enticing opportunities, stock picker Hilary Kramer warns not to get caught up in the initial frenzy of buying shares the first day of trading. Before she invests, Kramer prefers to track newly public companies for several quarters to get a feel for their performance and how they are putting their capital to use.
Following are Kramer’s favorite companies that are expected to launch IPOs in 2015 (plus Shake Shack)…and two that she does not like*…
Azul. Airline stocks soared in the past several months as jet-fuel prices plummeted. That should benefit Azul Linhas Aéreas Brasileiras, the regional airline founded by JetBlue founder David Neeleman, who has Brazilian citizenship. Despite the stagnant economy in Brazil, the country’s airline market delivered 13 consecutive months of growth through the end of 2014. Azul has grown quickly by dominating Brazil’s underserved domestic flight routes. Annual demand is expected to double to 200 million passengers within five years. However, Neeleman has much bigger plans—he’s spending $8.5 billion to buy or lease more than 60 wide-body jets to start service to southern Florida, New York City and other parts of the US and transform Azul from a niche carrier into an international airline.
CardioDX. This technology company is a pioneer in the field of cardiovascular diagnostics. It offers the first simple, commercial blood test that determines whether patients are at serious risk for arrhythmia and heart failure, the leading causes of death for men and women in both the US and worldwide. The test examines 23 genes that highly correlate with coronary artery disease. If you are predisposed to suffering a potential blockage, your physician can take precautions and provide lifestyle suggestions and medications that could save you. Until now, expensive imaging tests were the only ways to predict potential heart attacks with a high degree of accuracy. Not only has CardioDX’s test proved more accurate than tests such as radiation scans, but even at $1,200 per test, it’s less expensive. The test’s adoption by the medical community and insurers has been slow. Since 2009, CardioDX laboratories have delivered results for about 50,000 tests. But the pace should pick up. The CardioDX test has gained Medicare Part B approval, making it a covered benefit for approximately 54 million Medicare beneficiaries.
Dropbox. As digital files grow ever larger, most people need more and more digital storage for their photos, videos, documents and other information. That bodes well for this leading cloud-storage company, which generates hundreds of millions of dollars in annual revenue. Dropbox allows you to keep your data securely online, transfer large amounts of data quickly and enable multiple users to collaborate or share information. The company attracts customers with its “freemium” model, which provides two gigabytes of free storage when you sign up, then allows you to buy additional space. For $15 per month per person, individuals and companies get unlimited storage. With more than 300 million users, the company was expected to launch one of the big tech IPOs back in 2014. But investors grew worried about whether Dropbox could maintain its popularity as users migrated from computers to mobile devices…and worried how the company would handle giant competitors such as Apple, Google and Microsoft, which offer competing storage services. The good news: Dropbox is in even better shape than it was a year ago. Apple’s iCloud has been hampered by reliability issues and a hacking scandal last year, and neither Google Drive nor Microsoft OneDrive can match Dropbox’s seamless, easy-to-use features. Dropbox also is attracting more business users who are willing to pay higher rates than consumers.
Xiaomi. Most US investors have never heard of this fast-growing tech company, the dominant smartphone provider in China and the third-largest in the world. Xiaomi (pronounced she-yow-mee) expects to increase the number of phones it sells in 2015 by 40%, compared with last year, to 100 million, mainly through clever advertising on social media that appeals to young, affluent Chinese consumers. The company offers its high-quality phones cheaply (up to two-thirds less than comparable Apple and Samsung devices) by selling only through the Internet and by making money on the back end marketing additional services to users. Xiaomi also is in the best position to become China’s first global consumer-electronics brand by replicating its success in developing markets such as India, Indonesia and Brazil.
Shake Shack (SHAK) began 14 years ago as a hot dog cart that generated long lines in a Manhattan park. Its founder is Danny Meyer, who had earlier created some of the city’s most prestigious restaurants, including Gramercy Tavern and Union Square Cafe. Shake Shack now operates 63 locations from Las Vegas to London to Dubai, with revenue of $84 million in the first nine months of 2014, a 41% increase from the same period the year before. Meyer expects to add 10 new company-owned outlets per year.
The following companies—with IPOs expected in 2015—are too risky to invest in…
Airbnb, the global online lodging marketplace that matches travelers with home owners willing to rent out rooms.
Uber, the car service available in 200 cities that allows you to order a private car or ride share through an app on your smartphone.
These companies have been heralded in the media for revolutionizing how consumers think about the traditional hotel and taxi industries. But both are contending with serious regulatory issues and legal pressures that could significantly weaken the growth of their businesses.
*Companies that file with the Securities and Exchange Commission for IPOs aren’t assigned ticker symbols until shortly before their IPOs are launched. Also, some expected IPOs do not materialize or are delayed.
