In this article, we will discuss the 10 best IPO stocks to buy heading into 2025.
Navigating The Future of IPOs
The current climate in the IPO market suggests a potential rebound, particularly looking ahead to 2025. While recent market volatility has stunted IPO activity, analysts believe that stability and a risk-on appetite from investors are crucial for revitalizing this sector. A significant number of companies are poised to go public, with many choosing to remain private longer due to favorable capital availability. This backlog indicates that once the market stabilizes, there could be a surge in IPOs as firms seek to capitalize on improved conditions.
Additionally, advancements in technology and strategic partnerships are positioning many companies for growth, making the future of the IPO market exciting for investors. This sentiment was discussed in the earlier days of October by Ashley MacNeill, Vista Equity’s head of equity capital markets, in a conversation on CNBC, which we covered in our article on the 8 Most Profitable New Stocks To Invest In. Here’s an excerpt from that conversation:
“For the IPO market to regain momentum, she emphasized 3 critical factors: a lack of market volatility, stable market conditions, and a risk-on appetite from investors. Most importantly, she highlighted the need for corporations to provide consistency and clarity regarding their business plans and execution strategies. This clarity emerged in 2023, leading her to believe that 2025 could be a promising year for IPOs.
McNeill also discussed the current status of private markets, noting that many companies are choosing to remain private longer due to the availability of capital. She pointed out that approximately 45% of US venture capital-backed firms are poised to go public, which translates to over 350 firms potentially looking to tap into the market…
…The implementation of GenAI has been transformative for many of these companies, positioning software firms to leverage this technology effectively. She characterized the sentiment around software versus AI as one where software is expected to benefit from AI advancements. However, she cautioned that it takes time to realize the measurable impacts of GenAI…”
READ ALSO: 7 Cheap New Stocks To Invest In Now and 10 Recent IPOs in Micro Cap Stocks.
Later again, on October 24, Ashley MacNeill of Vista Equity Partners joined CNBC’s ‘Closing Bell’ to shed light on the current state of the IPO market, which has been notably sluggish. MacNeill emphasized that for the IPO asset class to function effectively, 3 key conditions must align: a stable macroeconomic environment, investor willingness to deploy capital, and companies’ ability to communicate their earnings forecasts. She pointed out that while there has been some stability with the onset of the Fed’s rate-cutting cycle this fall, companies have struggled to provide consistent guidance regarding their earnings over the next 3 to 5 years.
Despite the prevailing sentiment of a strong economy and record highs in the stock market, the IPO market remains stagnant. MacNeill suggested that this disconnect may stem from a bifurcation between the tech IPO market and the broader IPO market. Companies are beginning to feel more comfortable sharing their narratives with investors, particularly regarding how GenAI fits into their business models and how they are navigating macroeconomic challenges. A significant theme in recent discussions has been that companies are choosing to remain private longer, largely due to the growth of private credit as an alternative source of capital. MacNeill noted that this trend has contributed to the delay in the IPO market’s return to normalcy. However, she remains optimistic about the evolution of IPOs, suggesting that public markets will regain their appeal as high valuations and investor demand for public offerings increase.
MacNeill referenced Robert Smith, Vista’s founder and CEO, who expressed optimism about upcoming mergers and acquisitions activity. This sentiment was echoed by Todd Bowley, a well-known investor who noted a resurgence in animal spirits, indicating a renewed eagerness among investors to engage in transactions. MacNeill agreed with this assessment, highlighting palpable energy among public investors eager to deploy capital in innovative sectors like technology and GenAI. However, she acknowledged that higher interest rates could impact IPO decisions as companies weigh the cost of equity against alternative funding sources. Historically, rising rates have not favored IPOs, yet MacNeill believes that current macroeconomic conditions are aligning favorably for potential public offerings.
Vista Equity Partners recently raised a $20 billion fund, with a significant portion allocated toward AI enterprise software companies. MacNeill likened investing in GenAI to early internet investments, suggesting that we are just at the beginning of a lengthy investment cycle. She emphasized that GenAI-enabled software represents a critical path forward for technology investments.
While the IPO market faces challenges due to macroeconomic uncertainties and evolving capital sources, there are signs of optimism as companies begin to communicate more effectively with investors and as investor appetite for innovative technologies grows. With that being acknowledged, we’re here with a list of the 10 best IPO stocks to buy heading into 2025.
Methodology
We used the Finviz stock screener to compile a list of 15 stocks that went public in the last 2 years. We then selected the 10 stocks with high analysts’ upside potential and that were also the most popular among elite hedge funds. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best IPO Stocks To Buy Heading into 2025
10. Silvaco Group Inc. (NASDAQ:SVCO)
Average Upside Potential: 163.55%
Number of Hedge Fund Holders: 19
Silvaco Group Inc. (NASDAQ:SVCO) develops and markets electronic design automation (EDA) software and technology CAD software. These software tools are used by semiconductor companies to design and develop integrated circuits (ICs), which are essential components in various electronic devices, from smartphones to computers.
In the second quarter of 2024, the company experienced significant growth, reporting a 19% year-over-year increase in revenue, reaching $14.96 million. TCAD and EDA revenues were particularly strong, growing by 34% and 20%, respectively. While SIP revenue saw a decline of 30%, the overall picture remains positive, with gross bookings surging by 36% year-over-year
The company’s TCAD and EDA divisions experienced remarkable growth, driven by the soaring demand for advanced semiconductor design and simulation tools. This momentum was further fueled by the acquisition of ten new clients and a 5-year extension of a significant SIP licensing agreement. It also completed its initial public offering in May, raising a substantial $106 million.
Silvaco Group Inc. (NASDAQ:SVCO) made significant strides by launching and commercializing its innovative AI-powered digital twin modeling platform, FTCO. This strategic move, coupled with a strengthened partnership with Micron Technology, expanded the reach of FTCO and secured a substantial $5 million investment.
The TCAD Baseline Release expands to support planar CMOS, FinFET, and GAA transistor technologies, enabling semiconductor companies to accelerate technology development. The platform offers advanced CMOS process and device simulation, boosting performance, yield, and efficiency. It supports highly accurate 3D process simulation, stress simulation, and cryogenic applications. This collaboration with Purdue University leverages NEMO5 for atomistic quantum transport simulation, providing a competitive and attractive solution for advanced CMOS design.
The increasing demand for advanced semiconductor design and simulation tools, along with the successful integration of AI-powered solutions, further solidifies the company’s leadership position.
9. Oddity Tech Ltd. (NASDAQ:ODD)
Average Upside Potential: 31.58%
Number of Hedge Fund Holders: 21
Oddity Tech Ltd. (NASDAQ:ODD) operates as a global consumer technology company, offering an AI-driven online platform that deploys data science to identify consumer needs and develop solutions in the form of beauty and wellness products. It creates personalized product recommendations and efficient supply chain operations, providing a seamless and innovative customer experience.
The company’s 6-year investment in technology continues to yield significant returns, enabling it to maintain record-high margins and reinvest in technology, science, and new brand development. It’s the leading D2C platform, capitalizing on the growing online demand, and anticipating online sales to reach 50% of the market in the coming years. With over 50 million unique users, the company has a captive audience for new products, categories, and brands. This strategy has proven successful with brands like IL MAKIAGE and SpoiledChild.
The company’s brand-building machine is another key differentiator. By leveraging first-party data, it creates brands with strong product formulations and unique brand identities. By using digital biology, it is developing next-generation, science-backed products to address consumer needs.
The second quarter and first half of 2024 were record-breaking for the company. It made $404 million in H1 2024 revenue, a 28% increase. Whereas in Q2 alone, it made a revenue of $193 million, up 27% year-over-year. Its impressive online presence, and strategic investments in technology and new brands position Oddity Tech Ltd. (NASDAQ:ODD) for continued growth and success. While short-term challenges exist, the long-term outlook remains positive, driven by the company’s strong market position and innovative approach.
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