When we look back at the evolution of the social-, mobile- and cloud-technology offerings of the last year, we should smile about the trajectory of many of the companies that have launched in that time. That's because these stocks have been incredible performers: LinkedIn (LNKD), which announced a huge secondary offering last night; Zillow (Z) which just got a gigantic new shareholder; and Yelp (YELP).
First consider LinkedIn. Here's a company that came public in May of 2011 at $45, and immediately went to $94, as the social-networking site had a ton of buzz about it. At the time, the opening was widely criticized as a throwback to the dot-bomb days, when people lost fortunes chasing dubious Internet companies without track records or even opportunities for profitability -- or, in some cases, even sales. Sure enough, the stock dropped to $60 six months later, and the chatter was that the site was just a fad -- and that there really wasn't any hope for long-term growth.
Two years later, and you have had a four-fold increase in earnings -- not revenue, but earnings -- and the stock isn't done yet. In fact, I bet its $1 billion offering will be snapped up without any problem, and that it will be put away by growth-seeking money managers who recognize that earnings could conceivably double again next year.
Then there's Zillow, the real-estate-listing company. Here's one that is absolutely despised by many short sellers, and there's high-quality research out there that's been saying it is very overpriced. But was it? The stock had its initial public offering at $20 on July 20, 2011, and immediately opened at $35.77 amid calls of Internet over-exuberance. After all, wasn't this just a company that helped you find the price of your house? Sure enough, it came to earth fast, or at least almost back to its IPO price, trading to $22 six months later amid suggestions that the competition had gotten too great.
When I mentioned this stock positively just a week ago, I was bombarded by people who thought it was overvalued. Among them was a fellow who was all over me with top-notch research about what a joke Zillow was, including this gem: "It doesn't even own its own content!" Maybe someone should tell that to Australian billionaire James Packer. We learned last night that he bought 9.4% of the company. No wonder its secondary offering -- five million shares price at $82, a 3% discount to the last sale -- worked so well.
Finally there's Yelp, the Internet-listings company with a great deal of mobile momentum. Here's one that came public at $15 in March of 2012 and flew up to $24 on opening day. A few months later, as part of a broader June swoon, it traded below the offering price, sinking to $14. But a series of spectacular revenue-growth quarters have now powered the stock up to $52, as it is clear the company can go profitable any time it wants. The international rollout, though, is so strong that every penny should go to it. Smart, smart company.
All three of these stocks have been gigantic winners, and I think they'll continue to be so, given how well they dovetail into the trinity of social, mobile and cloud. I have to believe that LinkedIn, even as it has more than doubled this year, will be able to find buyers right at these levels for the billion offering. That's how starved managers are for the shares of fast-growing companies. The darned thing's worth $27 billion already, and all I can say is: If Microsoft (MSFT) had bought this, instead of Nokia's (NOK) handset division, it would have been very well-received.
I know it's chic to be jaundiced and jaded. But these three stocks have defied numerous short calls and have continued to triumph. Those who felt burned during the last Internet go-around, and even felt vindicate on the blow-ups of Groupon (GRPN) and Zynga (ZNGA) -- or the Facebook (FB) IPO and its aftermath, for that matter -- have to be smarting this time around. Because this time around, for the most part, they worked. They seem to continue working, too, even at these admittedly exalted levels.
