Even amidst all the buzz over recent IPOs of hot consumer-facing tech names like Uber, Lyft, and Pinterest, the hottest performers in 2019 have been enterprise software names.
Many of the best-performing tech stocks these days are traditionally “less sexy” companies: business-to-business software services that just keep going up.
Zoom, which went public in April, is trading at nearly triple its IPO price of $36. PagerDuty also went public in April and is trading at more than double its IPO price of $25. MongoDB, a document database service that went public in 2017, is up 96% in 2019. Salesforce—by no means a new name, and often the standard to which all other cloud and enterprise names get compared—is up just 22% in 2019, but up 90% in the past two years.
Danielle Shay, director of options at Simpler Trading, calls these names “phoenix” stocks, she tells Yahoo Finance, “because they will fall when the market falls, but they are the first ones to rise out of the ashes. So for me, as a short-term options trader, those are the ones that I go immediately to after a market downfall. I love them for that reason.”
(Zoom on Thursday reported its first quarterly earnings since going public, and beat expectations on revenue and earnings. Rosenblatt Securities, in a note, said the company is “red hot out of the gate.“)
Cloudera, Docusign, and Dropbox are some of the enterprise names in the portfolio of the Renaissance IPO ETF, which selects newly-public companies to add to the fund and rebalances the weighting each quarter. The ETF added Zoom last month, and hit a 52-week high in May.
“These companies—Zoom, and PagerDuty is another one—they address the enterprise and they tend to be subscription-based businesses, and they’re high-growth,” Kathleen Smith, manager of the Renaissance IPO ETF, told Yahoo Finance. “So you can get growth and recurring revenue. We’re about to see one called CrowdStrike, which just raised its range, and basically it addresses enterprise with cybersecurity. And if you look at the numbers, they’re very strong. And then Slack is another one: enterprise, subscription-based.”
Daniel Roberts is a senior writer and show host at Yahoo Finance. Follow him on Twitter at @readDanwrite.