Investors are captivated by hot IPOs because they are the first opportunity to invest in an exciting company. But you can earn fantastic profits, even if you miss that eye-catching first-day doll, if the company is built for long-term success. All three of the companies I present today are challengers who are changing the way business is done in their respective industries. Lemonade (NYSE: LMND), Airbnb (NASDAQ: ABNB), en Confirm holdings (NASDAQ: AFRM) has a lot to offer investors, even after their initial public offering, and it’s worth checking out.
Consumer-centered insurance technology
While fintech (financial technology) has changed the way people do banking and purchasing, insurance has largely been left out of the revolution. Enter Lemonade, which is trying to upgrade the insurance for the 21st century.
Lemonade offers homeowners, renters and pet insurance in the US and several other countries. It prides itself on ‘immediate everything’, and uses behavioral economics and artificial intelligence to present policies and fully approve claims online. Lemonade’s intake chatbot asks the applicant questions to determine the exact price and give a price within seconds. About 30% of claims are taken care of by another bot within three minutes, and approved funds are transferred immediately to the plaintiff’s bank account. The company maintains a fixed fee of 25% on each policy and transfers the rest to a third party reinsurer to handle claims. Customers can donate remaining money to claims and payments to a charity of their choice.
Image Source: Getty Images.
Lemonade has traditional insurance companies as competitors, but there is no other home insurance company that is digitally focused and puts it in a class of its own. The transparent and customer-friendly approach to a normally unattractive part of life clearly resonates with homeowners and tenants, as the company gained 1 million customers in just four years of operation in December.
Other notable signs of progress are the gross earnings premium, which increased by 104% in the third quarter of 2020, and the gross loss ratio, which decreased by 8 percentage points in the previous year to 72%.
I’m a big fan of Lemonade, and I think it has a lot of value to investors because it disrupts the insurance industry and gets millions of customers. Even at an exorbitant valuation of 88 times sales at recent prices, Lemonade is a stock you should keep an eye on.
Revolutionary journey
Airbnb has enhanced the travel industry by creating a market for global homes and rooms and experiences. The company’s debut in December was one of the hottest stock market goers in 2020, and the price rose by 45% in 2021.
Image source: Airbnb.
It’s not all rosy. Gross booking volume (GBV) decreased by 39% in the first nine months of 2020 and revenue decreased by 32% as the pandemic shattered the travel industry. of 2021.
But the loss is an improvement of $ 375 million over the previous year. And while the company expects more pain in the short term due to COVID-19, management sees a total eligible market of $ 3.4 billion – and a path to growth by investing in its brand and connections to more hosting unlock and engage its market, and innovate via its website. We see the strength of Airbnb’s model in its growth ahead of the pandemic: GBV rose 29% in 2019, while revenue rose 32%.
As vaccines begin, the economy prepares for a travel revival, and Airbnb will be one of the recipients of the pent-up demand. The business model of the company, as a market for holiday rentals, is asset-light and makes it agile and easily scalable. This is the future of travel, creating experiences in places that were previously inaccessible.
Meanwhile, stocks are trading at 32 times the sales, which is quite high but lower than the other stocks on this list. Although investors are turned off by the valuation, there is a lot of potential here, and you should definitely keep it on your watch list.
Creative ways to make expensive purchases affordable
Affirm was one of the first IPOs in 2021 and had already risen 18% of the opening price on the first day of trading.
Affirm sees itself as an alternative to credit cards, and now offers buy, pay later options so customers can more easily afford large purchases. The company sees this as a win-win for customers, who can get what they need without hidden interest or late fees, and retailers who make more sales. Confirmation also receives money from both sides, in the form of payment processing fees for merchants and interest from customers.
Image Source: Affirm Holdings.
The company’s services are available through 6,500 trading partners, including Walmart and Best buy. Revenue increased by 93% in 2020 compared to the previous year, and gross merchandise volume increased by 77%.
Affirm’s largest sales partner is Peloton Interactive, which accounts for about 30% of total sales. But it recently reached an agreement Shopify to be his exclusive partner to buy now, pay later services, which should give another big boost.
It has not yet made a profit, but because it is increasing its number of partners and gaining new, happy customers, it is seeing a cyclical effect where both are increasing, leading to higher revenues and profits. I would not recommend a purchase here yet, but it is to keep an eye on your watchlist.