The markets have posted solid gains since the beginning of the year, even if we occasionally see daily – or even weekly – losses. The uptrend has seen the S&P rise 20% this year and the NASDAQ rise 17%. The generally rising stock market opens up many new opportunities for investors.
Opportunities come in many shapes and sizes, including new publicly traded companies. As markets rise, IPO activity has also increased. In the first half of this year alone, there were 1,070 IPOs raising a combined total of $222 billion. That kind of money draws the attention of Wall Street, and investment firm Goldman Sachs has been busy pinpointing the new stocks that were poised to win in the current circumstances.
Recently, Goldman analysts tapped into two stocks that are new to the public markets and are likely to rise 80% or more in the coming months — a solid return that investors should note. We’ve gone through the two TipRanks Database to see what other Wall Street analysts have to say about them.
We’ll start with Zevia, the LA-based soda company known for using the natural sugar substitute stevia as a sweetener. Zevia offers a line of organic teas and energy drinks that are sugar-free, gluten-free, low-calorie, and vegan-friendly. The company has been around for 14 years and has a presence in the US and Canada. Zevia now wants to expand into Latin America, Asia and Western Europe; it already sells directly to consumers on Amazon.com.
In June last year, Zevia submitted its intention to go public via an IPO and held the offer on July 22. Zevia launched 10.7 million shares of common stock, at a price of $14 each, and raised $150 million in total revenue, raising $139.7 million in net proceeds to the company.
Earlier this month, Zevia followed up on its IPO with its first quarterly financial report as a publicly traded company, for 2Q21. Zevia reported a company record quarterly revenue of $34.4 million, up 24% from the same quarter a year ago. Of that total, $16.2 million, or 47%, was gross. The company reported earnings per share of 30 cents per share.
Goldman Sachs analyst Bonnie Herzog describes Zevia as “an emerging, fast-growing beverage company that ticks all the boxes.” Herzog sets a buy rating for the stock, with a price target of $28, implying 88% growth over the next year. (To view Herzog’s track record, click here)
“We… see ZVIA as a disrupter within the $770 billion global liquid refreshments category. As such, we believe ZVIA has a long runway of strong, +DD revenue growth and conservatively estimate that net sales are likely to grow at a robust +33% CAGR through FY25 (to $457 million in net sales, a increase of $110 million in 2020).”
“In particular,” the analyst added, “we see a great distribution opportunity to dive deeper and broader into existing channels (mass/grocery/natural) and new channels (particularly convenience stores) as the main driver behind our robust growth outlook .”
This new stock has already received 6 ratings from the street analysts and they break down into 4 buys and 2 held, for an average buying consensus rating. The stock currently trades at $14.59 and has an average price target of $19.25, up 32% over the next 12 months. (See ZVIA stock analysis on TipRanks)
The next Goldman pick has a similar name and went public on the same day, but that’s where the similarities end. Zenvia is a Brazilian company in the tech world. It provides a unified communications platform that helps enterprise customers streamline customer communications with scalable, digital, contextualized experiences. The platform works with various communication channels including voice calls, SMS, WhatsApp, Instagram and web chat. The Sao Paulo-based company has more than 10,000 active customers in Latin America.
In Zenvia’s IPO, held on July 22, the company listed 12.9 million shares on NASDAQ with an initial price of $13 each. On July 30, the company announced a concurrent private placement of 3.84 million shares to Twilio through a private sale transaction at a price of $13 per share. Between the two events, the IPO and the private sale, Zenvia has raised approximately $200 million in gross proceeds.
Zenvia clearly has the momentum on its side. In the month since the IPO, shares have risen no less than 67%. Goldman Sachs analyst Diego Araga is one of those who say there is more room for growth.
Araga rates ZENV stock as a buy and his $35 price target gives confidence in a ~106% gain this year. (To view Aragao’s track record, click here)
Supporting his stance, Araga writes, “While the company continues to move from traditional lower-margin channels (e.g. SMS) to higher-margin SaaS offerings, we see a very asymmetric valuation, with a current valuation of 2x EV/ Sales 2022E over-discounted compared to global competitors still concentrated in traditional channels (5x) or compared to our US$35/share price target…”
The analyst continued, “While execution and good communication are critical, we see a straight forward path for multiples to initially rate closer to the aforementioned lower-multiple peers (5x) and then gradually move to higher-multiple peers. (10-20x). ) as the company continues to deliver revenue diversification and market consolidation, with continued strong SaaS revenue growth and further acquisitions as key potential catalysts for the next 12 months.”
Overall, Zenvia has picked up two bullish analyst reviews in its short time in the public markets, giving the stock an average buying consensus rating. ZENV shares are selling for $16.91 and their average price target of $29.90 suggests they will be up ~77% over the next year. (View ZENV Stock Analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are those of the recommended analysts only. The content is for informational purposes only. It is very important to do your own analysis before making any investment.