Two New Issues Still Pack a Punch

 | Jan 23, 2012 | 10:30 AM EST
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Recent initial public offerings haven't exactly been embraced by Wall Street, but InvenSense (INVN) and Imperva (IMPV) continue to be accumulated and are trading nicely above their offering prices.

Judging by the way InvenSense has traded since its mid-November IPO, investors are excited about growth prospects.

In early August, the company had planned to offer shares at proposed range of $8.50 to $10.50 but decided to postpone the IPO because of market volatility. In mid-November, the company offered 10 million shares at $7.50 per share, within its revised range of $7.00 to $8.50. That decision has paid off nicely.

InvenSense currently has a market capitalization of $1.2 billion and an average daily volume of around 500,000 shares. It provides motion sensor chips for Nintendo's Wii and other consumer electronics, including smartphones and tablets. A big chunk of InvenSense's revenue still comes from Nintendo, but investors seem to be optimistic that the company's technology will attract new customers in coming quarters. Qualcomm (QCOM) owns about 7% of InvenSense.

Earnings and sales growth in recent quarters have been impressive, to say the least. The company recorded $130 million in sales for the 12 months ended Sept. 30, 2011. In its latest quarter, earnings per share surged 275% from a year ago to $0.15 a share. Sales jumped 83% to $43 million.

For fiscal 2012, analysts expect annual earnings to soar 275% from 2011's level, to $0.45 a share. In 2013, growth is expected to slow, rising 29% to $0.58 a share.

Recent price and volume trends in the stock point toward accumulation. In terms of its chart, the last time to buy InvenSense was when it broke out over $11.85 from a first-stage IPO base. The stock is extended now, so don't chase it. I suspect that InvenSense will form another base at some point, mostly likely during the market's next consolidation phase. This is where the next buying opportunity will be found. Shares closed Friday at $14.89, up 2.6%.

INVN Daily

And let's not forget about Imperva, which offers database, file and web application solutions to protect high-value data in data centers. It also started trading in November. The company priced 5 million shares at $18, above the proposed range of $14 to $16. Shares closed Friday at $31.90, up 2.8%.

Imperva has a market capitalization of just over $700 million. It's thinly traded, with an average daily volume just north of 150,000 shares. The company isn't profitable yet, but sales growth has been impressive in recent quarters. During the first three quarters of 2011, the company did $54.9 million in sales. Analysts expect fourth-quarter sales to rise 28% from a year earlier, to $21.2 million.

Imperva's chart also looks pretty good, firming up after some recent selling. It's showing signs of accumulation with a solid up/down volume ratio of 2.5. I'm not a buyer yet but would consider buying if the stock takes out its recent high of $35.59 on heavy volume.

IMPV Daily

All in all, it's been a tough road for most IPOs in recent months. After early enthusiasm, Zynga (ZNGA), LinkedIn (LNKD) and Groupon (GRPN) continue to struggle to attract buying interest as investors remain unsure about these companies' growth prospects. LinkedIn is starting to show signs of life, but the stock remains about 40% off its post-IPO high.

Keep in mind that a stock tends to make its biggest price moves in the early stages of a firm's business. This is why you should always have a recent new issue or two on your watch list. A new product or service is usually what drives growth, and InvenSense and Imperva have them.

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