Here are the 4 Best Performing Tech IPOs in 2021
Although analysts believe the hyper-growth seen in the tech industry last year has now slowed, the industry’s prospects look bright nonetheless. Studies show that global technology adoption increased significantly during...
Although analysts believe the hyper-growth seen in the tech industry last year has now slowed, the industry’s prospects look bright nonetheless. Studies show that global technology adoption increased significantly during the pandemic. Furthermore, with the growing demand for digitization and cloud-based services, the tech industry is expected to continue benefiting. Indeed, the bullish sentiments surrounding the industry have helped the recent IPOs of tech concerns DigitalOcean (DOCN), Matterport (MTTR), SEMrush (SEMR), and Arqit (ARQQ) to deliver solid returns since their stock market debuts. So, let’s take a close look at these names.
The tech industry has achieved massive growth since the onset of the COVID-19 pandemic on the growing demand for digitization and automation and cloud-based services. The rapid adoption of modern innovations across sectors over a short and compressed timeline has created growth opportunities for the tech industry.
Analysts are optimistic about the software industry, predicting18% annual earnings growth over the next five years. In addition, 97% of global companies have increased their technology adoption to navigate the pandemic. A survey by the World Economic Forum has found that the pandemic has accelerated the adoption and integration of digital technology among medium and small businesses.
This solid backdrop has helped the shares of tech IPOs DigitalOcean Holdings, Inc. (DOCN), Matterport, Inc. (MTTR), SEMrush Holdings, Inc. (SEMR), and Arqit Quantum Inc. (ARQQ) gain significantly in price since they went public last year. So, let’s look at these best performing IPOs of 2021.
DigitalOcean Holdings, Inc. (DOCN)
New York City-based DOCN is an international cloud computing platform operator. The company provides infrastructure solutions across compute, storage, networking and enable developers to expand the innate capabilities of the cloud. The company went public following a traditional IPO process on March 24, 2021, at $47 per share.
On Nov. 16, DOCN announced the pricing of an offering of $1.3 billion of 0% convertible Senior Notes, due 2026. From the $1.27 billion in expected net proceeds, the company intends to use approximately $350 million to repurchase shares of its common stock and the remaining for general corporate purposes.
In September, DOCN acquired server-less platform provider Nimbella. The acquisition should expand the company’s operational capabilities into the function-as-a-service (FaaS) market.
For its fiscal third quarter, ended Sept. 30, DOCN’s revenue increased 37.3% year-over-year to $111.43 million. Its adjusted gross profit improved 42.7% from the prior-year quarter to $88.96 million. Its non-GAAP net income and non-GAAP net income per share rose 439.4% and 300%, respectively, from the same period last year to $14.16 million and $0.12.
An $0.11 consensus EPS estimate for the quarter ending March 2022 indicates a 266.7% year-over-year increase. And the $125.87 million consensus revenue estimate for the quarter reflects a 34.4% improvement from the prior-year quarter. Furthermore, DOCN has an impressive surprise earnings history; it has topped consensus EPS estimates in three of the trailing four quarters.
The stock has gained 71.3% in price since it went public on March 24 and 29.8% over the past six months to close yesterday’s trading session at $72.78.
Click here to check out our Cloud Computing Industry Report Matterport, Inc. (MTTR)
MTTR operates as a spatial data company focused on digitizing and indexing the built world. The Sunnyvale, Calif., company’s offerings include Matterport digital twins, Matterport Capture, Matterport Workshop application, Matterport Showcase application, and Matterport VR. MTTR went public after a business combination with special purpose acquisition company (SPAC) Gores Holdings VI on July 23, 2021.
On Dec. 15, MTTR announced that it would redeem all its outstanding warrants for purchasing shares of the Company’s Class A common stock. Regarding the redemption, J.D. Fay, Chief Financial Officer of MTTR, said, “If all of the Public Warrants are exercised on or prior to the redemption date, we will add approximately $79 million to the balance sheet, which is additive to the $640 million of gross proceeds raised in the closing of the merger in July 2021.”
On Dec. 9, the company announced that Domino's Pizza Inc. (DPZ) franchisee, RPM Pizza, had chosen MTTR to redesign and renovate 30 stores over six months. The venture is expected to benefit the company.
MTTR’s total revenue increased 10.3% year-over-year to $27.66 million in its fiscal third quarter, ended Sept. 30. This can be attributed to a 36.1% rise from the prior-year quarter to $15.68 million in subscription revenues. For the nine months ended Sept. 30, the company’s cash, cash equivalent, and restricted cash balance stood at $149.32 million, up 205.1% from the same period last year.
Analysts expect MTTR’s EPS to increase 8.7% year-over-year in the next year (fiscal 2022). Likewise, the Street expects its revenue to improve 46.6% from the current year to $160.06 million next year.
MTTR has gained 25.9% in price since it went public on July 23 to close yesterday’s trading session at $18.22. Over the past three months, the stock has gained 1.2%.
SEMrush Holdings, Inc. (SEMR)
SEMR is developing an online visibility management Software-as-a-Service (SaaS) around the world. Its platform enables companies to identify and reach an audience for their content through the correct channel. The Boston-based company went public via an IPO on the New York Stock Exchange on March 25, 2021.
On Dec. 22, SEMR announced that for a limited time it would provide certain Amazon.com, Inc. (AMZN) Alexa Internet paid users a free subscription to its trends traffic tools as an alternative after AMZN declared that Alexa Internet would be closed down on May 1, 2022. Through this free subscription, the company intends to bolster its position in the market research and web traffic analysis segments.
On Nov. 19, SEMR priced a public offering of 5,000,000 shares of its Class A common stock at $20.50 per share. The company expects to use the net proceeds from the offering to invest in sales and marketing activities and fund its research and development efforts.
For its fiscal third quarter, ended Sept. 30, SEMR’s revenue increased 53% year-over-year to $49.25 million. Its gross profit came in at $37.89 million, up 54.9% from the prior-year quarter, while its non-GAAP net income stood at $12,000, up substantially from its negative year-ago value.
Analysts expect SEMR’s revenue to increase 36.6% year-over-year to $54.65 million in the next quarter (ending March 2022). In addition, it has topped consensus EPS estimates in three out of the trailing four quarters, which is impressive.
SEMR’s stock has gained 33.9% in price since it went public on March 25 to close yesterday’s trading session at $18.75.
Arqit Quantum Inc. (ARQQ)
Based in London, ARQQ provides cybersecurity services through satellite and terrestrial platforms in the U.K. The company’s offerings include QuantumCloud, which enables any device to download software that creates encryption keys to partner with any other device. ARQQ went public after a business combination with Centricus Acquisition Corp. on Sept. 7, 2021.
On Dec. 23, ARQQ penned a contract with Virgin Orbit, a responsive launch and space solutions company, covering two launches for the company. Simultaneously, the parties announced their signing of a QuantumCloudTM Software License. The contract is expected to strengthen ARQQ’s profitability.
On Dec. 8, ARQQ and NEOM Tech and Digital Company signed a Memorandum of Understanding (MoU) to build and trial the ‘Cognitive City’ quantum security system. The system has global export potential and might add to the company’s revenue stream.
ARQQ’s net cash generated from financing activities improved 7,050.6% year-over-year to $120.11 million in the fiscal year ended September 30. The company’s cash and cash equivalent balance came in at $86.97 million, registering a substantial (44,589.1%) increase from its year-ago value.
ARQQ’s shares have gained 136.9% in price since it started trading on September 7 to close yesterday’s trading session at $19.78.
DOCN shares fell $1.77 (-2.43%) in premarket trading Wednesday. Year-to-date, DOCN has declined -9.40%, versus a 0.55% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.