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:

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

hand stacking money coins
Tech Stocks

Billionaires Are Selling Tesla Stock and Betting on This TSX Stock

Tesla stock has long been the one to beat, but after falling in share price, stability may be more key.

Read more »

chart reflected in eyeglass lenses
Tech Stocks

OpenText Stock: Down 27%, Buy Now for Pure Long-Term Perfection

OpenText stock may have dropped after earnings, but according to its CEO, future growth is just getting started.

Read more »

ETF chart stocks
Dividend Stocks

These ETFs Are My 2 Favourites to Buy for 2025

These two top ETFs may be going through some volatility right now, but both are due for huge returns in…

Read more »

A person uses and AI chat bot
Tech Stocks

Missed Out on Nvidia? My Favourite AI Stock to Buy and Hold

Its high growth potential, resilience to the emergence of low-cost LLMs, and low valuation make it a compelling stock in…

Read more »

Abstract Human Skull representing AI
Tech Stocks

1 Top Tech Stock to Invest in Canadian AI Stocks for Long-Term Gains

While many AI companies attract attention for high but speculative growth, this reliable AI stock is worth a look by…

Read more »

e-commerce shopping getting a package
Tech Stocks

Why Shopify (TSX:SHOP) Could Be the Hottest TSX Stock in 2025

Shopify (TSX:SHOP) might have enough steam to push the TSX higher and higher in 2025.

Read more »

online shopping
Tech Stocks

Down 22% From All-Time Highs, Is Shopify Stock a Good Buy in 2025?

Shopify stock has delivered market-beating returns to shareholders since its IPO in 2015. Is the TSX tech stock still a…

Read more »

A shopper makes purchases from an online store.
Tech Stocks

1 Canadian Stock Down 28% That’s Pure Long-Term Gold

If there's one strong stock investors should consider, it has to be this top notch tech stock making a comeback.

Read more »