High-flying IPO stocks sell off after quarterly results

Earnings


Three of Wall Street’s top-performing IPO stocks in 2019 tumbled late on Thursday after the companies’ quarterly results failed to satisfy investors and justify their high valuations.

Zoom Video Communications dropped 2% in extended trade, even after the videoconferencing provider’s quarterly results and full-year outlook beat analysts’ expectations.

Cybersecurity company Crowdstrike tumbled 8.7% after it reported better-than-expected results and gave upbeat quarterly guidance.

And business software seller Medallia tumbled 12.3% after its results also beat analysts’ average expectations.

In a year marked by disappointing public listings by Uber Technologies and Lyft, the stock performances of Zoom, Medallia, and Crowdstrike have stood out since their IPOs.

George Kurtz, co-founder and chief executive officer of Crowdstrike speaks during a global technology conference in Laguna Beach, California, Oct. 17, 2017.

Patrick T. Fallon | Bloomberg | Getty Images

Prior to Thursday’s after-hours declines, Zoom was up 157% from its initial public offering in April, Crowdstrike had risen 155% since it went public in June, and Medallia was up 74% from its IPO in July.

The sell-offs on Thursday, even after the money-losing companies beat consensus expectations, suggest investors may be becoming more concerned about high valuations.

“The strong print and weakness in the shares has been a recent pattern,” Needham analyst Alex Henderson said.

“Investors are leery of this up-today, down-tomorrow market and seem to be selling into strength, and unwilling to let them ride, preferring to take profits,” Henderson added.

Crowdstrike traded earlier on Thursday at about 85 times expected earnings for the next 12 months, while Medallia traded at a multiple of 37, according to Refinitiv data.

Zoom traded at 38 times expected revenue over the next 12 months. Analysts on average do not expect Zoom to report a non-GAAP profit until the quarter ending in October 2020.

Both Zoom’s and Crowdstrike’s year-over-year revenue growth decelerated from their first quarters as a public company. Zoom’s sales growth slowed to 96% in the second quarter, from 103% in the first, while Crowdstrike’s growth eased to 94%, from 103%.

Uber is down 28% since its May IPO, which had easily been this year’s most highly anticipated. It is now widely viewed as the most disappointing, while Lyft has slumped 36% from its March IPO.

Slack Technologies’ stock price more than doubled on its first day of trading in a direct listing on June 19, but has steadily fallen since then. On Friday, Slack closed just 15% above the reference price used in its listing.



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