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What Is Wrong at Care.Com After the IPO?

Jon C. Ogg

Care.com Inc. (CRCM) was supposed to be a great IPO. In fact, it was going to even be in our top IPOs to watch in 2014, but the company came public before the final selections had been made for the research. This is supposed to be a great company, but on a day that the stock market hit a new high, this stock is trading at a post-IPO low, which screened out as a 52-week low. This is now even trading as a busted IPO, meaning it is under the formal pricing.

When Care.com came public, its total shares sold were 6.152 million, if you include the overallotment option. It priced at $17 per share. On its first trading day of January 24, Care.com traded initially up at $21.21, and then it rose to $24.30 by the close.

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By February 3, this stock was above $29 briefly. That was then. As of Thursday, Care.com's shares were down almost 6% and were just under $15 at $14.98. The stock had even seen a low of $14.72 on the day. That means that in two months it has effectively lost half of its value form the post-IPO peak.

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Care.com is supposed to be a great company, linking up those in need or personal services with providers and caregivers. This includes child and senior care needs, pet care and housekeeping services. Simultaneously, it allows those caregivers who offer those services a venue to provide those services to those in need.

Interestingly enough, Care.com's consensus price target is listed as $25.00, but the number of analysts is fewer than five so we do not count it as a genuine consensus figure, compared to more widely followed stocks.

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Perhaps the biggest issue is that investors are smartening up and shying away from companies losing money with high valuations. The market cap only recently fell under $500 million. With its earnings report in February, Care.com posted a loss of $3.6 million, and it forecast losses for all of 2014 in excess of $1 per share.

Even with revenue growth of close to 35% projected in 2014, Care.com still will lose money for the whole year. Maybe investors will only buy top quality stocks with the stock market at all-time highs.

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