With the S&P 500 index trading near all-time highs, the initial public offering market has been robust. It’s also not uncommon that quality IPO stocks remain under-the-radar for a while before surging higher as it catches analyst and investor attention. Early days of listing can therefore provide investors with some good trading and long-term investing opportunities.
The focus of this column is on under-the-radar IPO stocks of 2024 that look attractive from a valuation perspective. In my view, these IPO stocks can double within the next 6 to 12 months. With the possibly of multiple rate cuts in the coming quarters, I believe that growth stocks are poised for a big rally. These IPO stocks are therefore good trading bets for the medium-term.
Further, considering the fundamentals and industry potential, these ideas can also be considered for the long term. Let’s discuss the business and industry factors that are likely to be catalysts for these stocks trending higher.
Ibotta (IBTA)
Ibotta (NYSE:IBTA) allows (through Ibotta Performance Network) consumer packaged goods brands to deliver digital promotions to consumers. After trading at highs of $117 after listing, IBTA stock has corrected to current levels of $70. I see this as a good buying opportunity with the stock trading at an attractive forward P/E of 23.
The first point to note is that Ibotta has a total addressable market of $200 billion. With a big market potential and more than 850 clients, I expect healthy top-line growth to sustain. Further, I am only talking about the addressable market in the U.S. Potential overseas expansion can help in accelerating growth.
For Q1 2024, Ibotta reported revenue growth of 54.7% on a year-on-year basis to $71.8 million. For the same period, adjusted EBITDA was $22.6 million with an EBITDA margin of 28%. Growth metrics have therefore been healthy coupled with positive operating cash flows. An equally strong performance in the coming quarters is likely to translate into stock re-rating and a sharp rally from oversold levels.
PACS Group (PACS)
PACS Group (NYSE:PACS) has been steadily moving higher since the IPO. However, the healthcare stock remains undervalued at a forward P/E of 21.2. Once the idea is in the limelight, I expect a sharp rally.
As an overview, PACS Group is a provider of skilled nursing and assisted living facilities in the United States. The company was founded in 2013 and has pursue aggressive expansion. As of Q1 2024, PACS reported 218 facilities across nine states.
One of the key differentiating factors for PACS Group is lower cost of service. This is reflected in the fact that the company’s mature facilities have an occupancy rate of 94.6%.
To elaborate, hospitals have a cost of care at $2,914 per day. In the post-acute care segment, inpatient rehabilitation facilities and long-term acute care have a cost per day of $1,850 and $1,753 respectively.
In comparison, the company’s skilled nursing facility have a cost per day of $550. With this advantage and the headroom to expand in newer states, PACS Group is positioned for stellar growth.
Tempus AI (TEM)
Tempus AI (NASDAQ:TEM) is another IPO from the healthcare sector that looks attractive. The company is a provider of healthcare technology with focus on AI-enabled precision medicine. Besides the point that Tempus has an innovation edge, anything related to AI has been surging. I therefore expect healthy returns for medium-term investors.
Last month, Tempus AI received U.S. Food and Drug Administration clearance for “Tempus ECG-AF device that uses AI to help identify patients who may be at increased risk of atrial fibrillation.” This is an important business development and underscores the application of AI in the healthcare sector.
It’s also worth noting that the Centers for Medicare & Medicaid Services has granted Tempus with Advanced Diagnostic Laboratory Test (ADLT) status for “next-generation sequencing assay, xT CDx.” I believe that these are still early days for Tempus. As more healthcare technology solutions are commercialized, growth is likely to be stellar.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.