Should You Buy Hot New Tech Stocks in the December IPO Party?

Are you buying shares in the likes of DoorDash (NYSE:DASH)? Here’s what Canadian investors should know about the December IPOs.

| More on:
Initial Public Offering (IPO) concept image, businessman selecting stock trading interface

Image source: Getty Images

The last big hurrah of the 2020 tech stock IPOs has something for everybody this December. It’s like a Santa’s grotto of momentum-laden goodies. There’s Airbnb for the grown-ups, and Roblox for the kids (of all ages). There are other treats under the tree, too. But, to stretch the analogy, are these holiday novelties going to provide years of enjoyment? Or will they break as soon as they’re out of the box?

How durable are these new stocks?

Let’s take a look at one of the more defensive names on the list of December 2020 IPOs. DoorDash (NYSE:DASH) has seen a lot of activity straight out of the stalls. Shooting up an impressive 80% in its initial offering, DoorDash is perhaps the ultimate pandemic stock. It’s a hot new tech stock. It’s a consumer staples stock. It’s a lockdown stock. What’s not to like?

There’s even the suggestion that DoorDash could be the new Snowflake — a stock that only goes up. Or at least that’s the bullish take among momentum investors, anyway. But there’s already some caution among analysts. The prospect of a post-pandemic recovery is already eating into the bull case for such stocks. While near-term momentum is all well and good, a longer-term growth thesis becomes weaker with every positive piece of vaccine news.

That makes DoorDash a potentially dangerous investment. It’s expensive — although that’s to be expected in this space. But its IPO has arguably come at the wrong time, with Big Pharma bringing recovery signals on all sides — it’s too expensive and too late. Of course, time will tell. And there are two sides to the vaccine story. A more pessimistic reading calls for a prolonged pandemic, and many more months of uncertainty.

Investing in tried-and-tested tech stocks

It’s worth mentioning Docebo’s (TSX:DCBO) upcoming U.S. IPO here. This has been well received by analysts, and hints that there could be further upside in this name. Going public in October 2019, Docebo has since proven that it has richly rewarding mid-pandemic chops. Marked out for extra momentum potential in 2021, this is one TSX tech stock to pick up in stages. The now-regular vaccine announcements offer opportunities to buy on weakness.

Catering to a locked-down society, Docebo is a buy if you’re bullish on the digitalization trend in a post-recovery market. It’s got strong geographical diversification under its belt. Plus there’s the built-in socially distanced aspect of its cost-reducing corporate training offerings. While the stock could definitely be cheaper, with a P/B of 33, this key tech pick could have further to climb in the new year.

The Canadian training software company has seen strong momentum since listing on the TSX, up 290% in 12 months. Taking its share price growth show on the road makes a lot of sense, therefore. There could also be unseen benefits to this dual listing. For instance, it will no doubt reassure current shareholders to see Docebo’s ticker trading over on the NASDAQ. And that kind of reassurance is something that may be missing from other IPOs this month.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Victoria Hetherington has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Snowflake Inc.

More on Tech Stocks

Business man on stock market financial trade indicator background.
Tech Stocks

1 Growth Stock Down 50 Percent to Buy Right Now

There are plenty of growth stocks in the market worth considering, but Shopify (TSX:SHOP) looks like one of the best…

Read more »

Woman has an idea
Tech Stocks

Prediction: 1 Stock That Could Trounce the Market 

The TSX has been favouring tech stocks, but not this one. However, it has the potential to trounce the market…

Read more »

clock time
Tech Stocks

Long-Term Investing: 3 Top Canadian Stocks You Can Buy for Under $20 a Share

These three under-$20 stocks offer excellent buying opportunities for long-term investors.

Read more »

Businessman holding AI cloud
Tech Stocks

AI Will Transform Everything: Investors, Be Early Adopters and Buy These 3 Stocks

Investors looking to invest in companies doing big things in AI should consider these three stocks for their portfolios.

Read more »

stock research, analyze data
Tech Stocks

Forget Shopify: These Unstoppable Stocks Are Better Buys Today 

Should you consider buying Shopify stock while rivals consider a buyout or should you go for stocks with a stronger…

Read more »

A colourful firework display
Tech Stocks

2 Potentially Explosive Stocks to Buy in March

These two growth stocks are destined for many more years of market-crushing returns.

Read more »

edit CRA taxes
Tech Stocks

TFSA Millionaires Are Learning They Can Still Be Taxed

If you day trade stocks like Shopify (TSX:SHOP) in a TFSA, you may be taxed.

Read more »

Shopping and e-commerce
Tech Stocks

Where Will Lightspeed Stock Be in 5 Years?

Lightspeed stock (TSX:LSPD) continues to be touch and go, so what might happen in the next five years?

Read more »