While IPOs attained a record-high level last year, with a low-interest-rate environment being a catalyst, surging market volatility and several macroeconomic headwinds contributed to the significant slowdown in IPOs during the first quarter of 2022. According to Connecticut-based IPO investment management and research firm Renaissance Capital LLC, less than 20 U.S. companies have entered since the start of the year. Also, the SEC has now proposed new policies that could remove the advantages of special purpose acquisition company (SPAC) mergers over traditional IPOs, and hence more uncertainty prevails for private companies who are aiming to debut this year.
Moreover, geopolitical issues, rising inflation, Fed’s aggressive interest rate hikes, and rising energy prices have led to a sharp decline in the number of IPOs so far this year. In addition, these factors have caused immense market volatility and resulted in a significant price slump for companies that marked their market debut last year.
Toast, Inc. (TOST), Nu Holdings Ltd. (NU), and Robinhood Markets, Inc. (HOOD) could not withstand the market volatility and are currently trading significantly below their 2021 IPO price. Moreover, given their poor fundamentals and poor growth potential, we think these stocks are avoided now.
Toast, Inc. (TOST)
TOST functions as a cloud-based and digital technology platform for the restaurant industry in the United States and Ireland. The company offers Toast Point of Sale (POS), a hardware product; Toast Order & Pay, which enables guests to order and pay from their mobile devices; Toast Flex, which is used for on-counter order and pay; Toast Go, a handheld POS device and Toast Tap, a card reader.
For the first quarter ending March 31, 2022, TOST's loss from operations increased 1920% year-over-year to $101.00 million, while Its net loss amounted to $23.00 million. The company’s loss per share stood at $0.20 over the period.
Analysts expect TOST's consensus EPS to remain negative in the first quarter ending September 2022. The company's shares have plunged 52.4% year-to-date and 61.7% over the past six months. Closing last trading session at $16.52, TOST is currently trading 142.1% lower than its IPO price of $40.
TOST's POWR ratings are consistent with this bleak outlook. The stock has an overall rating of D, which translates to Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
TOST is rated a D grade for Value and Stability. Within the C-rated Software - Business industry, it is ranked #45 of 56 stocks.
To see additional POWR Ratings for Sentiment, Quality, Growth, and Momentum for TOST, Click here.
Nu Holdings Ltd. (NU)
Headquartered in Sao Paulo, Brazil, NU functions as a digital financial services platform and technology company primarily in Brazil, Mexico, and Colombia. It provides Nu credit and debit cards; Ultraviolet credit and debit cards; and mobile payment solutions for NuAccount customers to make and receive transfers, pay bills, and make everyday purchases through their mobile phones.
During the first quarter ending March 31, 2022, NU’s loss before income taxes increased 26.8% year-over-year to $67.65 million, while its net loss amounted to $45.00 million. The company’s loss per share amounted to $0.0097.
The consensus EPS estimate is expected to remain negative in the second quarter ending June 2022. The stock has declined 57% year-to-date and 48.2% over the past three months. Closing its last trading session at $4.03, the stock is currently trading 123.3% below its IPO price of $9.00.
NU’s weak fundamentals are reflected in its POWR ratings. The stock also has an F grade for Value. In the D-rated Consumer Financial Services industry, it is ranked 36 of 49 stocks.
In addition to the POWR Ratings grades I have just highlighted, you can see the NU rating for Momentum, Growth, Quality Sentiment, and Stability here.
Robinhood Markets, Inc. (HOOD)
Headquartered in Menlo Park, California, HOOD operates as a financial services platform in the United States. Its platform allows users to invest in stocks, exchange-traded funds (ETFs), options, gold, and cryptocurrencies. The company also offers various learning and education solutions comprising Snacks; Learn; Newsfeeds; lists and alerts; and offers First trade recommendations.
HOOD’s loss before income taxes increased amounted to $1.43 billion for the first quarter ending March 31, 2022, while its net loss came in at $1.45 billion. The company’s loss per share stood at $6.26 over the period.
Analysts expect HOOD’s consensus EPS to remain negative in the second quarter ending June 2022. The stock has declined 41.6% year-to-date and 77.9% over the past nine months. Closing its last trading session at $10.38, the stock is currently trading 226.1% lower than its IPO price of $38.
HOOD’s poor prospects are also apparent in its POWR Ratings. The stock has an overall D rating, which equates to Sell in our POWR Ratings system. It has an F grade for Stability and a D grade for Sentiment and Value. HOOD is ranked #137 of 156 stocks in the F-rated Software – Application industry.
Click here to see the additional POWR Ratings for HOOD (Quality, Growth, and Momentum).
TOST shares were trading at $16.50 per share on Tuesday afternoon, down $0.02 (-0.12%). Year-to-date, TOST has declined -52.46%, versus a -12.46% rise in the benchmark S&P 500 index during the same period.
About the Author: Spandan Khandelwal
Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.
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