What Jfrog Is Telling Us About the IPO Market

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This year’s IPOs were rocky, given the market uncertainty brought upon by the pandemic, elections, and other major economic variables. Last September, all eyes were on the much-awaited IPO of Snowflake, a cloud data platform company backed by prominent investor, Warren Buffett. But as people were placing bets on SNOW, another tech company, JFrog, made its debut.

What is JFrog?

Despite a more lowkey launch, JFrog had a lot of hype behind it. The company is one of the leading platforms that provide software engineers with cutting-edge binary repository management products, including its flagship end-to-end repository manager, Artifactory. The company’s US headquarters is situated in California, while its international bases are in France and Israel. JFrog is one of the many other tech companies that went public during the ongoing viral outbreak. Joining it are Unity, Asana, and Palantir, among other names. Its IPO price was $44 on the Nasdaq and quickly soared at roughly 50% to close its first day.

Why Do People Want to Invest in It?

Tech stocks in general have become the cash cow for today’s generation due to its liquidity and relatively faster price surges. Many investors, however, may not have enough capital to buy a good chunk of companies, like Amazon or Alphabet, both of which have their stock prices at above the $3,000 and $1,000 mark respectively. Tech IPOs tend to be a lower-cost alternative for getting your foot in the tech space as an investor.

As an individual company, there are many reasons as to why you should add Jfrog stock to your current portfolio. According to experts at Money Morning, “Though JFrog might not have set any records in its first day trading, it’s still one of the most exciting stocks trading today.” That’s because JFrog can dramatically cut the costs and time it takes to push out software updates to consumers of cybersecurity products, such as antivirus and anti-malware, worldwide.

Aside from its potential application in the cybersecurity space, JFrog can also be applied to any ecommerce platform that requires routine maintenance and updates. Rather than having the site black out for a couple of hours while updates are parsed and bundled, JFrog minimizes downtime and, consequently, losses sustained from said downtime.

Should You Invest in JFrog?

And if so, when do you pull the trigger? There are many reasons why you’d want to invest in newly minted tech stocks, like that of JFrog’s. For one, there is usually a lot of hype and momentum pushing its price, regardless of the stock’s underlying value. But even then, JFrog’s numbers do not disappoint.

For starters, JFrog’s revenue has grown by 65% last year, from $63M to more than $100M. In the next five years, the company predicts a market cap of $1 billion. JFrog is also unique in that the company is able to cut its losses at relatively blazing speeds. In 2019, the company was hemmorhaging a total loss of $5 million. Today, the total losses are roughly $420,000.

Another key fact that they have going for them is – of the 5,800 that compose their client base, 75% of it are Fortune 100 brands. This connotes steady demand for their products/services.

Now, when should you buy a piece of JFrog? The answer will vary depending on your risk profile, investment strategy, and growth objectives. Keep in mind that IPOs tend to artificially inflate the value of a company’s stock. In most cases, the stellar gains earned in the stock’s debut are lost the next trading day. Take SNOW as an example. After it reached its peak of $276 per share, the company’s stock price took a sharp dive to $226, a massive 22% dip within the span of 24 hours.

Both Snowflake’s and JFrog’s stocks could move further down in the following months to come. If you’re a firm believer of the company’s value and market position, buying incrementally on every pullback or using a dollar-cost averaging approach can be a low-risk way of adding JFrog to your portfolio. For those who want to play it safer, it can’t hurt to sit on the sidelines and see where prices move to in the next months to come.

Final Thoughts

Last year’s IPOs were a disaster, especially for Uber and Lyft. This year’s successful IPOs, however, attested by Snowflake and JFrog, prove that the IPO market remains solid and worth investing in. Their successful debuts come as an even more impressive statement, considering the risk aversion brought upon by the coming elections and the ongoing global pandemic.

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