AppFolio Inc. (NASDAQ.APPF) Sell or Short Recommendation - $14.25 PT
December 23 2015 concludes the 180-day lockup period on AppFolio Inc. (NASDAQ:APPF).
(We previewed this event on our IPO Insights platform.)
When the event occurs, its pre-IPO shareholders, directors and executives will have the chance to sell their ~26 million shares.
(click to enlarge)
(Source)
The potential for a sudden increase in stock available in the open market may cause a significant decrease in APPF shares, opening a short opportunity for aggressive investors.
Business Summary: Provider of Cloud-based Software for Small Businesses in the Legal and Property Management Industries
Based in Santa Barbara, California, AppFolio offers comprehensive, cloud-based software for a variety of industries, primarily property management and the legal industries. Their programs are designed for small to medium-sized businesses, and currently over 10,000 clients use AppFolio.
Their products include AppFolio Property Manager, a program designed for small to medium-sized property managers with applications such as posting and tracking tenant vacancies, managing maintenance and repairs with vendors, handling the leasing process electronically, and performing accounting and reporting to property owners.
The company's MyCase program offers management solutions for solo and small law firms by providing time tracking, billing and payments, legal document management, client communication, coordination with other attorneys, and general office administration applications. In addition, AppFolio offers Value+, which provides electronic payment solutions.
The AppFolio platform is designed to be a system that automates essential business processes and enhances engagement between a business and its clients and vendors. The mobile-optimized applications offer a user-friendly interface across a wide array of devices, which allow its clients to work from anywhere at any time.
Financial Highlights: Strong Increase in Q3 Revenue
For the third quarter ended September 30, AppFolio reported the following financial highlights:
- Revenue increased 56 percent to $20.3 million for the same period versus last year
- GAAP net loss was $4.8 million (or a net loss of $0.14 per share).
- The number of law firm clients increased 74 percent to 5,566; while property management customers increased 52 percent to 7,561 and 2.0 million units under management.
Competition: Buildium, RealPage, Yardi, Thompson-Reuters, LexisNexis
In the property management industry, other providers of cloud-based software focused on that business include Buildium, Yardi, Real Page, BuildingLink.com, Maintenance Connection, Accruent, and Rentec Direct.
For the legal industry, competitors include Thompson-Reuters, LexisNexis, Elite.com, Clio, Amicus Attorney, and Rocket Matter.
Strong Early Market Performance
AppFolio priced its IPO at $12 per share, at the low end of its expected price range of $12 to $14. The stock opened on the first day of trading at $12.22 and closed at $14.08, for an increase of 17 percent. Since then the stock reached a low of $14.15 on July 27 and a high of $19.64 on October 9. Currently, the stock trades at $15.34 (12.11.2015).
(Click on image to enlarge)
(Nasdaq.com)
Conclusion: Short APPF Ahead Of Its IPO Lockup Expiration
We suggest shorting APPF ahead of its IPO lockup expiration on December 23rd, given our recent findings of abnormal negative returns of ~3% in the window of time surrounding many of these events.
With specific regard to APPF, insiders consist of two VC/PE firms and none individuals. If even a few sell their holdings (as would make sense, given opportunity for profit), it could overwhelm the 6.2 million shares currently trading.
(Click on image to enlarge)
Comments
Log in or sign up to join the conversation.