7 IPOs In 2021 You Can’t Afford To Miss

IPOs were red-hot in 2020. They're finishing the year with a revenue record of $140 billion. The last record was in 1999 with $108 billion.

In case you missed out, we've got six monster IPOs to look forward to in 2021:

  • Instacart
  • Bumble
  • Petco
  • Stripe
  • Coinbase
  • Nextdoor
  • ThoughtSpot

We recently witnessed the biggest software IPO in history as Snowflake Inc. (NASDAQ: SNOW) sold 28 million shares for a total of $3.4 billion. The share price bolted out of the gate, more than 150%, from $120 to above $300.

Two rock star app-based companies also went public. Airbnb stock (NASDAQ: ABNB) exceeded expectations with $3.7 billion raised. DoorDash stock (NYSE: DASH) came out to the tune of $3.4 billion.

There are some even more exciting IPOs to watch for 2021. These could go public as early as Q1.

How to Think About IPO Investing in 2021

IPO investing can be tricky since you're relying on a lot of past information to judge the future. That's obviously not going to give you any clear answers on whether a stock is a buy or not down the road.

However, you can get some idea of where the company is at in its growth ahead of an IPO for a rough estimate of its chances.

If you trust the management and find out the company has grown its revenue significantly in the last few years, it might be out of the "growth phase." Its motivation for going public would be more than a mere cash grab.

Another thing to consider is always the expected valuation and price. These can either tell a true story or be immensely overblown – often the latter – by hype. As a result, you often see a drop after the IPO.

You could also have the opposite problem. The stock could open near or below expectations, which could spark negative sentiment.

That's why it never hurts to give the stock some breathing room before rushing in.

To learn more about IPO investing, check out our comprehensive IPO investing guide.

Now, let's get into these 2021 IPOs.

Instacart IPO Seizes on Digital Shopping Trends

An Instacart IPO is most likely underway in early 2021. It's a grocery shopping and delivery app.

The company had massive success as delivery became the primary mode of grocery shopping during the pandemic lockdowns.

Thanks to the boost, this could be one of the biggest IPOs in 2021.

It will go toe to toe with DoorDash since it recently also expanded to grocery delivery.

It's important to remember, however, that many conditions surrounding its IPO likely won't be the same. There are three things that separate Instacart from DoorDash, and it will be interesting to see how it all pans out.

For one, Instacart was founded by a former Amazon.com Inc. (NASDAQ: AMZN) employee, likely with some insight into the Prime delivery business. This could be a logistical leg-up for Instacart in that battle.

Another leg-up would be that Instacart was founded a year ahead of DoorDash. This might seem like a marginal difference, but don't underestimate the benefit of being a first-mover. The amount of ground you can cover in a year is significant.

Where it is truly a first-mover is in the "shopping" aspect of its business. While DoorDash only added groceries to its list this year, Instacart was the pioneer.

It has several of the familiar problems faced by gig stocks like DoorDash, Uber Inc. (NASDAQ: UBER), and Lyft Inc. (NASDAQ: LYFT). Yet, the company had an impressive 2020 and now could outperform its direct and indirect competition after a successful IPO…

Should You Buy Instacart Stock?

Instacart was valued at $3.4 billion in 2017. Since then, the company has rocketed to a $17.7 billion valuation.

Its demand grew 274% year over year due to the pandemic. Since a successful vaccine will take time to distribute, we could still be looking at similar growth in the near future.

Its latest numbers put the company close behind retail giant Walmart in online deliveries.

Instacart has been working all 2020 to streamline its order process with an "order ahead" feature and similar options to bolster its sales volume.

In addition, the company is partnered with over 500 retailers, including Walmart. This could give the company increased exposure to the market.

Unfortunately, it still suffers all the pressures you would expect from a California gig stock. The state passed a January 2020 law capping the number of contractors a corporation can hire.

Even if this weren't the case, Instacart shoppers, similar to Uber and Lyft drivers, have put pressure on the company to treat them more like employees, which would raise expenses for Instacart.

The story with DoorDash was that you should consider whether the company is an Uber or a Lyft. Since their 2019 IPOs, Uber is up 20%, and Lyft is down 37%.

Similarly, the DoorDash versus Instacart battle will be one of marketing and price competition, which could either drive both stocks down for a while or prove who's boss real quick.

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