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Beware of These 3 Recent IPOs That are Overvalued

The value of IPOs in the first half of this year surpassed mid-pandemic levels. However, since the Fed intends to start tightening its monetary policy later this month and inflation is rising, many recently listed stocks could suffer. Hence, we think it might be best to avoid the recent IPO stocks Amplitude (AMPL), Dutch Bros (BROS), and Tyra Biosciences (TYRA), which look overvalued at their current price levels. Let’s discuss.

For the first half of this year, initial public offerings (IPOs) hit  record highs, totaling $171 billion and surpassing the IPO boom of 2020. A loose monetary policy primarily drove the boom. However, a speculative rush by investors drove corporate valuations significantly higher. The IPO trend is not expected to slow anytime soon. Frontier markets investment bank Renaissance Capital anticipates the year will end with 400 traditional IPOs and 600 SPACs.

However, investing in IPOs can be risky due to a lack of historical data on companies listing the stock for the first time. Also, the Fed intends to reduce its monthly bond purchases later this month, marking its first step in  pulling back its monetary relief efforts. The central bank’s bond-buying is expected to decline by $15 billion each month. In addition, supply chain worries persist, driving high and persistent inflation concerns. These factors could adversely impact the performance of many recently listed stocks.

Recently listed stocks Amplitude, Inc. (AMPL), Dutch Bros Inc. (BROS), and Tyra Biosciences, Inc. (TYRA) look overvalued at their current price levels. So, we think it could be wise to avoid these stocks now.

Amplitude, Inc. (AMPL)

AMPL, in San Francisco, is a digital optimization system provider that  analyzes customer behavior with digital products. Its offerings include Amplitude Analytics, Amplitude Recommend, Amplitude Experiment, and Amplitude Behavioral Graph. The company went public in a direct listing of its Class A common stock on September 28, 2021.

On November 10, AMPL announced the opening of a data center in Frankfurt, Germany. The center is aimed at supporting the company’s customer base in the European Union. However, it may take some time for AMPL to realize gains from this increased operational capability.

On November 9, the company declared its partnership with data cloud company Snowflake Inc. (SNOW). Through the partnership, SNOW intends to leverage AMPL’s Digital Optimization System to unlock actionable insight for SNOW customers. However, the income from this venture may be stretched over a long period.

In terms of forward EV/Sales, AMPL is currently trading at 51.57x, which is 1,084.4% higher than the 4.35x industry average. Its 54.02 forward Price/Sales multiple is 1,143.9% higher than the 4.34 industry average.

For its fiscal third quarter, ended September 30, AMPL’s total operating expenses climbed 225.3% year-over-year to $68.26 million. Its non-GAAP loss from operations rose 228.8% from the prior-year quarter to $2.29 million. Its non-GAAP net loss and non-GAAP net loss per share increased 134.8% and 66.7%, respectively, from the same period last year to $2.08 million and $0.05. And analysts expect AMPL’s EPS to remain negative at least until the next year.

The stock has declined 9.1% in price over the past five days and 11.9% intra-day, to close yesterday’s trading session at $74.72.

Dutch Bros Inc. (BROS)

BROS is a Grants Pass, Ore., company that operates and franchises drive-thru shops. The company’s offerings include cold and hot espresso-based beverages and cold brew coffee products. BROS went public in a traditional IPO process on September 15, 2021.

On September 22, the company announced an offer for its customers on the Dutch Bros app in which 100 winners would receive free drinks for a whole year. Although the offer to  attract customers may seem ingenious, it may not add much to BROS’  revenue stream.

BROS’ 664.81 forward non-GAAP P/E multiple is  4,105% higher than the 15.81 industry average. In terms of forward non-GAAP PEG, the stock is currently trading at 17.41x, which is 1,657.1% higher than the 0.99x industry average. 

BROS’ total costs and expenses increased 211% year-over-year to $244.79 million in its fiscal third quarter, ended September 30. Its income from operations and net income declined 1,544.7% and 1,859.9%, respectively, from the same period last year to negative $114.98 million and $117.14 million. Its adjusted EBITDA decreased 2.6% from the prior-year quarter to $20.65 million. The Street expects its EPS to come in at a negative $0.02 for the current quarter (ending December 2021).

BROS’ stock has declined 10.7% in price over the past five days to close yesterday’s trading session at $62.30. It has declined 3.6% intra-day.

Tyra Biosciences, Inc. (TYRA)

TYRA is a preclinical stage biopharmaceutical company that develops therapies to overcome tumor resistance in patients and improve outcomes for patients with cancer. The Carlsbad, Calif-based company’s primary product is the TYRA-300, a treatment for muscle-invasive bladder cancer.

The company went public with an IPO of 10,800,000 shares of common stock at a price of $16.00 per share on September 15, 2021. TYRA's gross proceeds from the offering are expected to be $172.80 million.

TYRA’s 3.75 trailing 12 months Price/Book multiple means it is currently trading 5.1% higher than the 3.57 industry average.

For its third fiscal quarter, ended September 30, TYRA’s loss from operations increased 184.6% year-over-year to $6.64 million. Its net loss and comprehensive loss rose 184% from the same period last year to $6.64 million. The company’s general and administrative expenses increased 145.5% from the prior-year quarter to $1.15 million. Analysts expect TYRA’s EPS to stand at a negative $0.99 for the coming year (fiscal 2022).

The stock has declined 12.7% in price over the past five days and 1.9% intra-day to close yesterday’s trading session at $27.74.

Click here to checkout our Healthcare Sector Report for 2021

AMPL shares were trading at $75.56 per share on Thursday afternoon, up $0.84 (+1.12%). Year-to-date, AMPL has gained 37.88%, versus a 25.39% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.


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