A few so-called Internet 2.0 stocks have been big attention-getters in the recent crop of tech-sector initial public offerings, but they haven't necessarily been the best performers among new issues.
Of course, these have been in the media spotlight of late, ahead of Friday's planned Facebook IPO. Some are doing better than others: Despite a leap this week, Zynga (ZNGA) has struggled technically since early March. LinkedIn (LNKD), meanwhile, is working on its fifth month in a row of upside trade, and has been getting support at its 10-week line after pulling back from a May 4 high of $120.63. LinkedIn is a strong performer, both fundamentally and technically, and one that I have on my watch list.
But there have been some not-so-high-profile tech IPOs in the past few months that are holding up well technically in the market downturn.
Ellie Mae (ELLI), maker of enterprise software for mortgage lenders, went public at $6 in April 2011. It's notched gains in every month since November, and is consolidating just below its May 7 high of $15.80. This is a technically outstanding stock, and the company is growing its earnings and sales at robust rates. A buy point could present itself above $15.80 but, in the current market downturn, I would avoid new entries, even if a stock cleared its technical buy point. It's too easy for market-wide selling to drag down even strong performers.
Ellie Mae is a very small company, with market capitalization just shy of $330 million. The stock trades around 118,000 shares per day on average. Smaller, thinly traded stocks can be notably volatile, so extra care is often needed.
Away from that is SPS Commerce (SPSC), a maker of supply chain management software. SPS shares have twice hit resistance at $28.10 since February, and were stopped cold at $28 several times. Clearly there's a ceiling this stock needs to blast through. The company is not expected to report earnings until late July, so that won't be a catalyst for an upside move for more than two months.
SPS Commerce went public in April 2010, so I definitely still consider it new. Its IPO price was $12; the stock closed Wednesday at $27.80. The earnings growth story is also compelling. Analysts see income of $0.42 a share in 2012, a year-over-year gain of 62%. In 2013, the company is expected to earn $0.58, which would be an increase of 38%.
Another recent tech IPO that's rocketed higher -- albeit in volatile fashion -- is Tangoe (TNGO). The company, which made its Nasdaq debut in July 2011 at $10, makes communications management software for businesses.
It closed Wednesday at $20.51. Tangoe rallied to an all-time high of $23.05 May 9, following a first-quarter report that beat views. In Thursday's session, the stock rallied to within $0.09 of that high, but retreated as the general market weakened.
Tangoe's action Wednesday illustrates the risks inherent in making a new buy in a downward-trending market. Early in the session, as major indices rallied, Tangoe went along for the ride. However, as the morning's rally fizzled, so did Tangoe.
But in a bull market, recent IPOs -- companies that have made their public-market debuts within the past 10 or 12 years -- are generally among the best price movers. Many of these little-known, small-cap techs could prove to be lucrative portfolio additions when the next market rally emerges.