These IPO babies have been thrown out with the bathwater, says BofA
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Newly launched tech companies have had a difficult year, but there is hope for investors if they are able to find some treasure among the debris, Bank of America says. As the Federal Reserve continues its rate-hiking campaign, tech companies have been particularly affected. Tech companies are especially affected by higher interest rates, as these increase the cost of future cash flow. The Nasdaq Composite fell 23% by 2022. Justin Post, a Bank of America analyst wrote that “the selloff occurs because investors demand positive cash flow and profitability; two things which Internet and IPOs haven’t exactly been known for.” Post said that shares in some of the most recent tech IPOs are now attractive enough. He stated that multiples are now much smaller, and there’s a significant opportunity to invest in profitable stocks with low cash burn. Roblox’s shares are down by 78% from the record highs last year. Shares were down 78% from the 52-week peak of $141.60 at Monday’s closing. Nevertheless, Bank of America says, at these prices, investors are scooping up “an emerging category leader” in a new field — the metaverse. Roblox closed Monday at $46. This represents a 47% increase over the closing price. Online course provider Udemy also caught the firm’s attention, particularly for its enterprise segment Udemy Business — “an underappreciated growth driver.” Bank of America stated that Udemy’s management highlighted the fact that large enterprise companies are using Udemy Business. On Monday, the closing price of $13.46 was reached by Udemy. The target price is now $34, which represents an additional 150% over Monday’s closing value of $13.46. Xometry – an industrial parts market has lost 36% over the past year. Bank of America, however, says the stock’s current value is “very attractive.” The firm cited Xometry’s vast total addressable market, and the “long runway for growth.” TAM growth is possible due to global technology. [increases]”The bank concluded. Xometry was given a price target of $60 by Bank of America, which suggests an upside of around 81%. —CNBC’s Michael Bloom contributed to this story.
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