Tech IPOs Surge for Another Day, But Why Is Anyone's Guess
(Bloomberg) -- Recently listed technology companies are defying gravity once again, surging further past Wall Street’s price targets and their larger peers. But a Bloomberg News straw poll of analysts and traders revealed a wide range of theories on the group’s gains, with no consensus about where the top may be.
"The short-term fluctuation is obviously not my expectation," said Needham & Co. LLC analyst Jinjin Qian, who gave e-sport streamer Huya Inc. a Street-high $41 price target on Wednesday -- only to see the stock surge above $50 today.
Huya was up as much as 15 percent today, alongside another China-based streaming platform, iQIYI Inc. which jumped as much as 6.7% before paring those gains.
Dropbox Inc. jumped as much as 10 percent for a second straight day, trading 89 percent higher than its March 22 initial public offering price. The stock has eclipsed 11 of 13 one-year price targets awarded by sell-side analysts. Recent tech listings Zscaler Inc. and Zuora Inc. are also rising again, now trading above the one-year targets of all 16 analysts who cover them.
Here’s what some market participants told Bloomberg in interviews about this relentless group of stocks:
- Rishi Jaluria, Dropbox analyst at D.A. Davidson
- There’s nothing fundamental driving the stock price action
- Recent strength may signal that a large, institutional buyer is taking a sizable position; notes that yesterday’s volume was roughly triple the average day, excluding earnings
- Shares may also be rising on M&A speculation; Salesforce is the most likely buyer given it already holds a large stake
- Jinjin Qian, Huya analyst at Needham
- HUYA investors are realizing e-sports is going mainstream and Huya is the only pure-play on the secular trend; investor confidence also comes from its relationship with Tencent
- People pouring money into this are looking three years out, where I would say there’s still upside to the current price
- Chinese stocks like HUYA and IQ are valued below larger U.S. peers despite serving a potentially bigger market; investors see more room for growth
- Ihor Dusaniwsky, head of research for financial analytics firm S3 Partners
- Short activity has been very active, but today’s price move in DBX is "definitely not" short squeeze related
- Any short squeeze would have a minimal effect on the stock price
- Bruce Cox, senior vice president of investments at Stifel
- Momentum traders are buying the China-based stocks and a short squeeze is being felt
- DBX looks like the same type of momentum, "but less absurd"
©2018 Bloomberg L.P.