Two broken IPOs and one of the market’s most controversial stocks have soared 20% to 50% so far this month.
Jan. 7, 2020
This article was originally written by Rick Munarriz of The Motley Fool
Two weeks ago, I looked at a few stocks that were already trading at least 10% higher just a few days into 2020. Now I’m going to raise the bar, limiting my search to investments that have gained at least 20% this month.
More than 100 U.S. exchange-listed stocks have risen by 20% or better year to date. Pinterest (NYSE:PINS), Tesla Motors (NASDAQ:TSLA), and SmileDirectClub (NASDAQ:SDC) are among this year’s early winners. Let’s see why they’re revving up in 2020.
Pinterest: Up 20%
This has been a strong month for some of the underperforming IPOs of the 2019 class, and Pinterest is one of last year’s forgotten freshmen that’s turning heads as a sophomore. The visual search engine closed out 2019 just below its summertime debut price of $19, but it’s not a broken IPO anymore.
The year began with whispers of Pinterest as a buyout candidate, but it’s excitement for Pinterest’s improving fundamentals that’s led to a more sustainable pop. A couple of analysts have either upgraded the stock or boosted their price targets, and a positive development happened earlier this month, when traffic tracker eMarketer reported that Pinterest had overtaken Snap’s (NYSE:SNAP) Snapchat to become the country’s third most popular social media platform.
Pinterest is reaching a growing audience of 322 million monthly active users worldwide. The platform’s key audience — 80% of its audience consists of online moms who earn, spend, and influence buying decisions — is a goldmine, and investors are waking up to Pinterest as a dot-com darling in 2020.
Tesla Motors: Up 35%
It’s hard to find a more polarizing battleground stock than Tesla. Elon Musk’s electric-car empire has been a volatile investment, and thankfully for the bulls it’s been doing well. Tesla will report financial results after Wednesday’s market close, but the stock’s been shooting higher this month in anticipation of another blowout quarter.
Even bearish analysts have been jacking up their price targets, and bullish Wall Street pro Pierre Ferragu at New Street Research lifted his goal to a Street-high $800 last week. There are plenty of shorts betting against Tesla Motors, but this year’s gain is more than a short squeeze. Tesla’s short interest is essentially where it was a year ago and well below last year’s springtime peak. It’s fair to say that the week ahead will be even more volatile than usual, but now it remains one of this young year’s biggest winners.
SmileDirectClub: Up 50%
Finally, we have another member of the 2019 class of broken IPOs bouncing back this year. SmileDirectClub provides clear dental aligners at a discount to conventional orthodontist-initiated treatments.
SmileDirectClub is growing briskly — revenue soared 51% in its most recent quarter — but that wasn’t enough to save the debutante last year. Things have gone far better this year. The end of an exclusive supplier agreement last month now opens the door for SmileDirectClub to enter the wholesale market and start selling directly to dentists or orthodontists. SmileDirectClub also entered into a distribution deal for products with the country’s largest retailer.
There’s no denying that investing in IPOs is not for the risk-averse. However, the success of Pinterest and SmileDirectClub show that you can never count a broken IPO out of becoming Wall Street winners.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold no positions in companies mentioned above. Read our full disclosure policy here.
Rick Munarriz owns shares of Pinterest and SmileDirectClub, Inc. The Motley Fool owns shares of and recommends Pinterest and Tesla. The Motley Fool has a disclosure policy.