Money Morning Article of the Week
by Michael A. Robinson, Money Morning
Who says high-tech stocks have hit the skids?
In a move that bodes well for 2013 stock market, high-tech IPOs have been absolutely on fire in the closing weeks of 2012.
In fact, judging by their gains, high-tech IPOs have soundly beaten the rest of the market’s new issues over the last three months. At least five soared by more than 40%.
Even the IPOs that many market watchers thought would fizzle have jumped out of the box.
The most recent is SolarCity Corp. (Nasdaq: SCTY) which debuted last week.
Instead of landing with a thud, shares of the solar panel installer soared nearly 50% on its first day of trading from a reduced offering price of $8 a share.
That left SolarCity tied for third place among IPO performers in the quarter that ends Dec. 31. Even as of late yesterday, SolarCity shares were still up by 55%.
But SolarCity is just the latest big winner. Here is a look at the other four winning high-tech IPOs based on their closing prices as of last week.
High-Tech IPO #1: Workday Inc. Posted 70% Gains
Located in Pleasanton, CA, Workday Inc. (NYSE:WDAY) is up 70% off of its offer price of $28/share. The company is a leading provider of cloud-based computing software that helps businesses manage their office operations online.
As such, Workday is getting a lift from two big trends — the movement of data and applications to the Web, a.k.a. “the cloud,” and the need for companies to slash labor costs. It offers payroll, financial management, time tracking, procurement, and employee expense management.
Workday says it is redefining what it means to manage global and diverse workforces at a time when employees are using more wireless devices. In fact, the home page of the firm’s Website shows a picture of its software inside the screen of a smartphone.
No doubt, the firm shows strong growth. Shortly after its IPO, Workday said its fiscal 2013 third quarter sales grew by 99% from the year-ago period.
High-Tech IPO #2-3: Two Biotech Issues Finish in a Tie
Intercept Pharmaceuticals Inc. (Nasdaq:ICPT) is a development-stage biotech firm focused on novel therapeutics to treat chronic liver disease. The company says it has deep expertise in bile acid chemistry to treat liver diseases for which patients now have few options.
The company says its lead candidate, known as OCA, is the first product in its class to offer broad protection for the liver. Diseases such as hepatitis C can damage the body’s second-largest organ and lead to death.
In the U.S. more than 1,700 people a year die from lack of liver transplants. Throw in the impact of obesity on the liver, and Intercept is looking at a global growth market. The stock is up more than 65% since it debuted on Oct. 11.
For its part, Kythera Biopharma Inc. (Nasdaq:KYTH) is up nearly 65% since it went public on the same day as Intercept. Kythera is focused on what it calls “aesthetic medicine.“
As such, its lead candidate for FDA approval, ATX-101, treats double chins. The firm also is working on hair and fat biology as well as facial contouring. It has just completed enrolling patients in Phase 3 clinical trials in the U.S. and Canada.
High-Tech IPO #4: Amberella Matches SolarCity
Talk about a growth market. Ambarella Inc. (Nasdaq:AMBA) has its hooks in the fast-paced world of digital video at a time when millions are going online to watch everything from short clips to feature films.
Ambarella is a leading provider of low-power, high-definition video compression and image-processing solutions. Its products are used in a variety of HD cameras. These cover cameras for security, automotive video, wearable sports devices, and digital still pictures.
At the same time, the firm’s technology is used in television broadcasting systems, with video content encoded and transmitted to audiences around the world.
Let me close by noting that a Web-related IPO finished just short of ranking in the top five of fourth-quarter tech IPOs. It’s Shutterstock Inc. (NYSE:SSTK), which runs an online market for stock photos.
Since going public on Oct. 11, the stock is up roughly 45%. Then again, the firm has received buzz in everything from Reuters to The Wall Street Journal.
The Impact of Successful High-Tech IPOs
The success of these high-tech IPOs is vital to the entire investment world for two big reasons.
First of all, the current bull market is entering its fourth year. It is a period when stock returns tend to fizzle as the bulls decide to take profits and sit on their gains.
Simply put, to keep it all going it takes fresh inflows of cash to keep the hopes of strong market gains alive.
And that brings up point number two. The new ideas embedded in tech stocks serve as a lure for the fresh capital that will continue to drive the bull market forward.
See, the Fed can print all the money it wants to, but without new wares to ply, Wall Street’s money train just runs out of steam.
That’s why successful high-tech IPOs are so important to the market. Judging by how well these five have done, you can expect this market will keep moving forward in 2013.
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