Markets have posted solid year-to-date gains, even as we see occasional daily – or even weekly – losses. The upward trend has pushed the S&P up 20% for the year, and the NASDAQ up 17%. The generally rising equity environment is opening up plenty of new opportunities for investors.
Opportunities come in many shapes and sizes, including newly public companies. With markets rising, IPO activity has also increased. Just in the first half of this year, there were 1,070 IPOs which raised a collective total of $222 billion. That kind of money gets Wall Street’s attention, and investment firm Goldman Sachs has been busy pointing out the new stocks that poised to gain in current conditions.
Just recently, Goldman analysts have tapped two stocks new to the public markets as likely to jump 80% or more in coming months – a solid return that investors should note. We ran the two through TipRanks database to see what other Wall Street’s analysts have to say about them.
We’ll start with Zevia, the LA-based soft drink company known for using the natural sugar substitute stevia as a sweetener. Zevia offers a line of organic teas and energy drinks that are sugar-free, gluten-free, zero-calorie, and vegan-friendly. The company has been in business for 14 years, and has a presence throughout the US and Canada. Zevia is now looking to expand into Latin America, Asia, and Western Europe; it already sells direct-to-consumer on Amazon.com.
In June of last year, Zevia filed its intention to go public through an IPO, and held the offering on July 22. Zevia put 10.7 million shares of common stock on the market, at price of $14 each, and raised $150 million in total proceeds, with $139.7 million net proceeds for the company.
Earlier this month, Zevia followed up its IPO with its first quarterly financial report as a public company, for 2Q21. Zevia reported a company record for quarterly revenue, of $34.4 million, up 24% from the year-ago quarter. Of that total, $16.2 million, or 47%, was gross profit. The company reported an EPS net loss of 30 cents per share.
Goldman Sachs analyst Bonnie Herzog describes Zevia as ‘an emerging, fast-growth beverage company that checks all the boxes.’ Herzog sets a Buy rating on the stock, with a $28 price target that implies 88% growth in the year ahead. (To watch Herzog’s track record, click here)
“We… view ZVIA as a disrupter within the $770B global liquid refreshment beverage category. As such, we believe ZVIA has a long runway of strong, +DD topline growth and conservatively estimate that its net sales are likely to grow by a robust +33% CAGR through FY25 (reaching $457MM in net sales, up from $110MM in 2020).”
“In particular,” the analyst added, “We see a big distribution opportunity to go deeper & broader into existing channels (mass/grocery/natural) and new channels (esp. convenience stores) as the most important driver behind our robust growth outlook.”
This new stock has already picked up 6 reviews from the Street’s analysts and they break down to 4 Buys and 2 Holds, for a Moderate Buy consensus rating. The shares are currently trading at $14.59 and have an average price target of $19.25, for an upside of 32% in the next 12 months. (See ZVIA stock analysis at TipRanks)
The next Goldman pick has a similar name and went public on the same day, but that’s where the similarities end. Zenvia is a Brazilian company in the tech world. It offers a unified communications platform, allowing business clients to streamline their customer communications with scalable, digital, contextualized experiences. The platform works with a variety of communication channels, including voice calls, SMS, WhatsApp, Instagram, and Webchat. The Sao Paulo-based company boasts over 10,000 active customers across Latin America.
Zenvia’s IPO, held on July 22, saw the company put 12.9 million shares on the NASDAQ with initial pricing at $13 each. On July 30, the company disclosed a concurrent private placement of 3.84 million shares to Twilio through a private sale transaction with a price of $13 per share. Between the two events, the IPO and the private sale, Zenvia raised some $200 million in gross proceeds.
Zenvia clearly has momentum on its side. In the month since the IPO, the shares have gained an impressive 67%. Goldman Sachs analyst Diego Araga is among those saying there’s more room for growth.
Araga rates ZENV shares a Buy and his $35 price target indicates confidence in ~106% upside this year. (To watch Aragao’s track record, click here)
Backing his stance, Araga writes: “While the company is still transitioning from lower-margin traditional channels (e.g., SMS) into higher-margin SaaS offerings, we see a very asymmetrical valuation case, with current valuation of 2x EV/Sales 2022E overly discounted compared to that of global peers still concentrated in traditional channels (5x) or compared to our price target of US$35/share…”
The analyst continued, “Though execution and good communication will be key, we see a straight forward path for multiples to re-rate initially closer to the aforementioned lower-multiple peers (5x) and then gradually towards higher-multiple peers (10-20x) if the company continues to deliver in revenue diversification and market consolidation, with continually-strong growth in SaaS revenues and further acquisitions being key potential catalysts for the next 12 months.”
Overall, in its short time on the public markets, Zenvia has picked up two bullish analyst reviews, giving the stock a Moderate Buy consensus rating. ZENV shares are selling for $16.91, and their $29.90 average price target suggests they have ~77% upside for the coming year. (See ZENV stock analysis on TipRanks)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.