Get IPO Crazy With CrowdStrike, Peloton and Cloudflare
Wall Street’s Virtual Insanity
I worry about the sanity of the market sometimes.
The major financial publications today are all spewing some variation of the same headline — stocks fall because of trade war tariffs.
If you’ve read those same financial publications — or a better one such as Great Stuff — you already knew that the U.S. was imposing 15% tariffs on $110 billion in Chinese imports.
You also knew that those tariffs would go into effect on September 1.
And yet … here we are.
The future’s made of virtual insanity. The market is selling off like it just found out about the tariffs. The Dow even plunged more than 250 points on the open.
This was a known quantity. It was going to happen. Yet, somehow, the market was surprised.
This isn’t an escalation, as many financial publications are claiming. This is what it always has been: a full-blown U.S.-China trade war.
The posturing is over. Here comes the pain.
Why am I not surprised? I think I’m gonna have a heart attack and die from not surprise!
— Iago, Aladdin
But you, Great Stuff readers, shouldn’t be surprised.
I even included a handy-dandy chart last Monday so that you could track where the market would go. Here’s an updated version of that chart:
I think we all know what comes next.
President Trump will talk about setting an official meeting this month to discuss a trade deal with China. Expect Trump to tweet at some point that China really wants to make a deal this time and that we’re close to an agreement.
Then sit back and watch the market rally … again.
How much longer, I wonder, is Wall Street going to go along with this charade?
The Good: Strike First, Strike Hard…
Honestly, that should be CrowdStrike Holdings Inc.’s (Nasdaq: CRWD) motto. And there’s nothing Daniel LaRusso can do about it.
CrowdStrike is one of the hottest initial public offerings (IPOs) of the year — at least among companies that don’t lose billions of dollars. This Thursday, the cybersecurity firm will release its second-quarter earnings report.
Right now, analysts expect revenue of $103.6 million on a loss of $0.24 per share. Those targets have held steady for the past three months.
Investors, meanwhile, are looking for a repeat performance of the company’s first-quarter report. Back in July, CrowdStrike reported that revenue surged 103% year over year and that subscription revenue jumped 116%.
Now, I don’t recommend investing ahead of earnings reports, especially for recent IPOs. However, CRWD is certainly a stock to keep on your radar for investment potential after the event.
The Bad: Moderate to Severe Flare-Ups
If you stare at the clouds long enough, you can see whatever you want.
Another cybersecurity firm is going public later this month. Cloudflare Inc. filed with the SEC last week, announcing that it plans to offer 35 million shares in a range of $10 to $12 each.
The company specializes in cloud-based platform security and boasts that it blocks 44 billion cyber threats from 20 million internet properties per day.
That sounds wonderful from a cybersecurity standpoint, but it comes at a steep cost. Last year, Cloudflare said it lost $86.1 million on revenue that grew $43 million to $192.7 million. These figures sound tame for today’s billion-dollar-loss IPO market.
However, costs are skyrocketing. Administrative expenses soared 711% in 2018, and management expects those costs to continue to rise for the foreseeable future. And that doesn’t even include “legal fees, accounting, compliance, insurance, investor relations and other costs,” Cloudflare mentioned in its SEC filing.
Investors will certainly want to proceed with caution when considering Cloudflare’s IPO.
The Ugly: Post Your Peloton Losses
Fitness is a wonderful thing. We could all benefit from a healthier, more active lifestyle. But your portfolio? That’s another story.
Continuing our IPO theme today, Peloton Interactive Inc. is another “red-hot” company going public later this month. But the stationary-bike firm’s losses are not the kind you’re looking for. Last week, Peloton released its fiscal 2018 earnings statement, and the results weren’t pretty.
Sales were strong at $915 million, up 110% year over year. But the company’s net loss surged 80% on the year.
Peloton makes most of its money selling video-enabled, $2,000-plus stationary bikes and treadmills. The rest of its income arrives in the form of $39-per-month subscription fees for video classes streamed directly to your bike or treadmill.
This health fad has been strong for Peloton. The company has more than 1.4 million subscribers. However, it’s just that: a fad. How many other workout fads have we seen come and go in the past decade?
Also, there was this little gem in the company’s earnings report last week: “Our use of third-party content, including music content, software and other intellectual property rights may be subject to claims of infringement or misappropriation.”
So, Peloton doesn’t have a license agreement to stream the music it uses?
Wait until the Recording Industry Association of America finds out. This is going to be fun. I’ll grab the popcorn.
Since we’re focusing on IPOs today, I thought you’d like to know where to get the best IPO returns. As you can see from the chart above … it’s not the tech sector.
But … consumer staples? Consumer discretionary? Those are the leading investments?
Now, Funko hasn’t been our best performer (mostly because of the U.S.-China trade war). However, the company will have a blockbuster holiday shopping season.
We’re going to bank on that and then consider how things are going when January rolls around. Remember, more tariffs go into effect on December 15.
But I digress…
If you really want to crack the IPO code, Banyan Hill experts Paul Mampilly and Hudson Cashdan can tell you how to snag triple-digit gains in this crazy market. Click here to find out how!
Great Stuff: Did You Miss the Boat?
The premier Banyan Hill event of the year is less than two weeks away!
I’m talking about the Total Wealth Symposium at Amelia Island in sunny Florida.
Remember how I used my Great Stuff connections to save you some exclusive tickets? Well, some of you grabbed that opportunity and ran with it.
But some of you didn’t. I understand. Life comes at you fast. Sometimes you just don’t have time to travel to the beach to learn about investing for your future and becoming an independent millionaire.
I’d like to say I get it, but come on!
Paul Mampilly, Chad Shoop, Jeff Yastine, Ted Bauman and many more experts will all be under the same roof, telling you how to make millions. How do you not make time for that?
Luckily, I’ve still got your back. If you can make time to binge-watch Netflix, you can make time for this: The Total Wealth Symposium Live-Stream!
That’s right, folks. Watch every minute of the 2019 Total Wealth Symposium from the comfort of your own home. Sure, it’s not a beach with cocktails and room service, but it’s the next best thing, right?
Until next time, good trading!
Great Stuff Managing Editor, Banyan Hill Publishing