Are these upcoming IPOs a buy?

With so many upcoming IPO’s many traders and investors are asking whether names such as Snowflake, Amwell, and Palantir are opportunities. 


Here is the breakdown on multiple major IPO opportunities of 2020, and whether they are a solid investment for years to come.


Snowflake


Snowflake is a rapidly growing cloud data warehousing company that was founded in 2012. Snowflake's core business is cloud data and uniquely only charges customers for the data they use.


Snowflake has been a major talking point given that it will come to market on Sept. 15th and major firms and companies are jumping in on the action. 


Warren Buffett’s Berkshire Hathaway has positioned an initial investment of $250 million, with the plan of buying another $320 million worth of shares later on.


Furthermore, technology giant Salesforce is also getting in on the action, also investing $250 million into the cloud up and comer Snowflake. 


When digging into Snowflakes financials the last reported quarter, Q2, was not bad. Snowflake reported revenues of $133 million for Q2, representing a 121% YOY growth. 


Not only that but Snowflake currently has 3117 customers, and gross margins of 66% in Q2. 


On the downside, the company continued to run a loss of $171 million but management persists that profitability will come with scale.


Exploring the platform Snowflakes data platform “natively integrates storage, computing, and services” according to its published resources.


Snowflake also claims that customers can expect a 612% ROI over three years and that it currently manages over 250 PB of data with the platform actively running 515 million data work loads per day.


Finally, the company has managed to gain some large customers already. Some of Snowflake's current customers include Adobe, Sony, and DocuSign. 


Palantir 


Palantir is a secretive data analytics company that has been around going on 17 years. 


According to Palantir, the company “builds the world's leading software for data-driven decisions and operations”.


The company plans to go public through a direct listing on September 23rd under ticker symbol PLTR. Palantir is planning to nail down a $26 billion valuation.


When digging into the financials of Palantir the numbers are neither bad nor great. In 2019 Palantir reported total revenues of $742 million up 25% since 2018. On the downside Palantir lost $588 million in the same year.


On a more positive note the first half of 2020 has been even more convincing. When last reported in the first six months of 2020 Palantir reported revenues of $481 million representing a 49% YOY gain.


Not only that but operating expenses also dropped, with expenses dropping from 157% of revenues to 107%.


Further breaking down the company's revenue during the first six months of 2020 53.5% of Palantir’s revenues came through government business, while 46.5% came through commercial business.


Finally, Palantir maintains $1.5 billion in Federal government contracts and has been credited for the assistance in finding terrorist leader Osama Bin Laden. 


In short if you're looking to get in on a secretive data company that is standing by the United States armed forces, this ones for you. 


Airbnb


Airbnb is a popular online travel market place which connects homeowners to renters in over 81,000 cities and 191 countries.


Due to COVID-19 the company's IPO was delayed and revenues have taken a major hit, bringing the targeted valuation to a dismal $18 billion as of April.


The coronavirus also led the company to raise $2 billion in debt and equity securities, something that most definitely does not help the long term standing of the balance sheet.


Digging further into the numbers, total revenues dropped in Q2 of 2020 to $335 million from $842 million in Q1 of 2020.


Not only that but Airbnb’s loss also increased between Q1 and Q2 of 2020, increasing from $341 million to $400 million. 


In short Airbnb is attractive in the long run. At the end of the day COVID-19 will not be around forever and travel will eventually resume to its typical levels, but until then it will be a tough path.


AmWell


Another upcoming IPO is AmWell. AmWell is another telehealth company that has seen a large amount of growth throughout the COVID-19 pandemic.


AmWell plans to go public in the near future at a share price between $14 to $16 per share, which should raise between $490 million to $560 million. 


Not only that but major companies such as Alphabet are getting in on the action. Alphabet recently made a $100 million investment in AmWell, showing confidence in the future of the company.


Digging into the financials the numbers are mixed. While AmWell’s revenues were up 77% in the first half of 2020, totaling $122 million, the net loss to revenues ratio continued to rise, increasing from 46% in 2018 to 93% in the first half of 2020. 


On a more positive note, AmWell reported that health systems subscriptions rose 32% in the first half of 2020 and the sheer volume of consultations increased 200% in Q2 of 2020 compared to Q1 of 2020.


Finally it is important to note that most of this recent growth could be due to COVID-19 and looking forward the company could face a significant slowdown in growth throughout 2021. 


Prospectus 


While there are many more upcoming IPO’s Snowflake and Palantir are by far two of the most interesting of the year.


I expect most of these upcoming names will be highflying and it is important that investors don’t overpay, given that the hype that will likely spike the stocks beyond reasonable value.


On the other hand, these four especially, I believe propose a long term opportunity to get in on the early stages of some major companies. 

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Disclaimer: This is not direct financial advice simply opinion based on independent research. Luke Donay and Running With The Money are not responsible for any investment made based on public information.