Once Hot Internet IPOs Have Lost Their Luster: Suttmeier
When OpenTable (OPEN) came public in 2009, its tightly managed and over-subscribed IPO soared 60% in its trading debut. But those initial glorious days would prove to be short-lived as the restaurant reservation website quickly found itself in an ugly 8-month downtrend.
Since then this four year-old "elder-statesman" of the new internet sector has recovered, fallen, and then recovered again. Richard Suttmeier, chief market strategist at ValuEngine.com, rates the stock a ''hold'' and says that the volatility and opportunity presented by these type of companies makes for an interesting mix.
"The thing is, when you deal with these internet stocks, you never know what you're going to get," he says in the attached video, expressing his doubts that OpenTable's 100%, 10-month run has much more gas in the tank, so to speak.
Similarly, he points out that LinkedIn (LNKD) has also marked an IPO anniversary; its second since making a May 2011 debut. But unlike the boom-bust-boom performance of OpenTable, LinkedIn "has been one of the better (long-term) performers," although he feels its upward ascent looks limited at around the $174 level.
Younger still are shares of Pandora Media (P), which has been gaining interest lately in the wake of Apple (AAPL) entering the digital i-radio space. While Suttmeier calls the hold-rated music purveyor "a failed IPO" that currently has "upside limited to $17.75," he's not averse to trading the stock on pullbacks.
"Volatility is the name of the game with these internet stocks," he says.
As for shares of Yelp (YELP), which marked its one year IPO anniversary in March, Suttmeier also sees this social networking lifestyle site as a better trading play than a long-term hold. Specifically, because he thinks that it has only about $2 of upside versus almost $10 of downside risk.
And lastly, there's Facebook (FB), the much maligned one year-old giant of the social media space. Even though he calls it "the poster child for failed IPOs," it is Suttmeier's lone buy-rated internet play of a dozen that he tracks. He'd advise building a position on weakness in shares of Facebook with an eye to get out in the low $30s. "It will move with the markets."
