Chicago, IL – June 12, 2023 – Today, Zacks Investment Ideas feature highlights The Renaissance IPO ETF IPO, Li Auto LI, Bentley Systems BSY, Unity Software U and Tesla TSLA.
IPOs Quietly Leads this Market: 3 Top-Ranked Stocks to Consider
The Renaissance IPO ETF, which is a rules-based ETF providing exposure to newly listed stocks, has considerably outperformed the broad market YTD. The fund holds stocks that aren’t present on any major indexes and are less than three years old with the average age being 1.3 years.
This allows investors the opportunity to avoid single stock risk and benefit from the newest stock issuances without overlap in the rest of their portfolio. Each quarter the ETF is rebalanced as new IPOs are included, and older ones are dropped.
While some investors may choose to invest directly into the IPO ETF, parsing the components is a useful way to find new stocks to invest in. In this article I will cover three companies from the fund that have high Zacks Ranks.
Li Auto, Bentley Systems, and Unity Software all have bullish catalysts improving near-term expectations for the stocks. From strong momentum and technical chart setups, to improving earnings, and potentially world changing products, each of these stocks are a worthwhile consideration for any investor.
Bentley Systems
Bentley Systems is a leading global provider of software solutions for infrastructure engineering, construction, and operations. With a focus on digital advancements and innovation, Bentley Systems enables professionals in the architecture, engineering, construction, and operations (AECO) industry to design, build, and maintain infrastructure projects more efficiently and sustainably.
BSY’s comprehensive portfolio of software includes solutions for 3D modeling, project collaboration, asset management, and more. Bentley Systems serves a diverse range of industries, including transportation, utilities, buildings, and industrial plants. The company’s commitment to driving digital transformation within the AECO sector has garnered recognition and trust from its customers worldwide.
BSY currently earns a Zacks Rank #2 (Buy), indicating upward trending earnings revisions. While current and next quarter earnings estimates are mixed, FY23 and FY24 have been revised higher by 3% and 2% respectively. Additionally, sales are projected to grow across timeframes, with FY23 expecting nearly 12% YoY growth.
Bentley Systems also just cleared a major level of resistance on the chart, which it had been held under for the last year and a half. As soon as the stock price cleared the $44 level buyers haven’t stopped bidding, and the stock continues to push its yearly highs.
Unity Software
Unity Software is a leading technology company that specializes in the development of real-time 3D content creation and interactive software solutions. With its powerful and versatile platform, U empowers developers and creators to build and deploy immersive experiences across various industries, including gaming, film, architecture, automotive, and more.
The company’s software allows for the creation of stunning visual effects, realistic simulations, and interactive experiences. Unity’s platform is known for its ease of use, scalability, and cross-platform compatibility, enabling developers to reach a wide range of devices and platforms.
Unity’s solutions are utilized by a vast community of developers, including both large studios and independent creators, who leverage the platform to bring their creative visions to life. As a key player in the rapidly growing field of real-time 3D technology, Unity Software continues to drive innovation and redefine the possibilities of interactive content creation.
Unity Software has experienced significant upgrades in its earnings estimates, reflected in its Zacks Rank #2 (Buy). Current quarter earnings have been revised from -$0.08 to $0.06, demonstrating the company’s commitment to showing net profitability.
Sales growth for the company is expected to be exponential. Current quarter sales are projected to grow 73% YoY, while FY23 sales are expected to climb 54% YoY.
Because of its hyper speed growth rate, and huge industry potential Unity trades at a premium valuation. At 6.4x one-year forward sales it is well above the industry average of 2.2x, but below its two-year median of 9x and well off the high of 53x.
Li Auto
Li Auto is a Chinese electric vehicle (EV) manufacturer that has gained significant recognition in the rapidly expanding EV market. The company specializes in the production of smart electric SUVs that integrate advanced technology with sustainable mobility solutions.
Li Auto’s vehicles stand out due to their extended-range electric powertrain, which combines an electric motor with an onboard gasoline generator to extend the driving range, alleviating concerns related to charging infrastructure. This innovative approach allows Li Auto to offer a practical and convenient solution for consumers, particularly in regions with limited charging infrastructure. L has experienced rapid growth, with its vehicles gaining popularity among consumers in China.
Li Auto boasts a Zacks Rank #1 (Strong Buy), reflecting strongly trending earnings revisions. In the chart below we can see that FY24 earnings have skyrocketed over the last two months and have been revised higher by 250%.
Additionally, sales growth is expected to continue to be very strong. FY23 sales are projected to grow 131% YoY and FY24 sales are expected to grow 50% YoY. It is also worth noting that the Foreign-Auto industry currently sits in the top 9% of the Zacks Industry Rank, further boosting near-term bullishness.
As a high-growth, innovative EV company Li Auto trades at a high valuation, although it is considerably below its US counterpart Tesla. LI is trading at a one-year forward sales multiple of 2.2x, which is below Tesla’s 7.5x multiple, and below its two-year median of 3.9x.
Bottom Line
IPOs can be an interesting and profitable way to find explosive new stocks. However, investing in young, immature companies can come with much higher risk than established companies. But, by using Zacks proprietary research, investors can improve their odds of success by focusing on stocks with improving earnings, and additional bullish catalysts.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.
Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.
“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”
Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.
Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.
Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.
Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.
In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.
The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.
And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
