Retail trader favorites are having a rough week.
Several hot IPO stocks were hit hard in the final trading week of the year despite the broader market inching toward new record highs. As of late morning Thursday,
- Palantir is down over 13%
- Cloudflare is down more than 10%
- Snowflake is down 9.5%
- Peloton is down over 6%
- Plug Power is down more than 4%
- Crowdstrike is down almost 4%
After a record year for the IPO market, "it's OK to see a little weakness," JC O'Hara, chief market technician at MKM Partners, told CNBC's "Trading Nation" on Wednesday.
"This was one of the best places in the market to invest," he said, noting that half of this year's IPOs have notched gains of 25% or more on their first day of trading.
"We saw 20 names double in the first day. That is the strongest returns going back over a decade," he said.
Looking at a chart of the Renaissance IPO ETF (IPO), which holds shares of newly public companies, O'Hara saw more runway ahead despite its nearly 5% decline this week.
"It's above a rising 50-day moving average, above a rising 200-day moving average, so, this current weakness, we view it in the context of a minor pullback within a strong uptrend," he said. "These are the sort of pullbacks we want to be buyers of. So, yes, there's a lot of euphoria around this space, but I don't think the price action is done just yet and I do think the strength of these trends will persist into 2021."
Money Report
The IPO ETF has climbed nearly 111% year to date.
Within the IPO market, only one stock looks set to resume its rally, Gina Sanchez, founder and CEO of Chantico Global, said in the same "Trading Nation" interview.
"Every IPO has a different story, so, you have to be careful about what you're investing in," she said. "If you look, for example, at Peloton, that's an IPO that happened just at a perfect time for its particular business model, right in a pandemic when people couldn't find ways to keep their fitness regimes up. Peloton came to the rescue with a great product, but that product naturally has a churn to it. Most people will abandon fitness routines pretty quickly. So, will that last beyond the pandemic? Who's to say?"
Palantir's stock could also get hit for a while, after debuting at a lofty valuation, she said, raising concerns about the company's exposure to the struggling oil and gas industry.
"There was one IPO that I thought was interesting because it's taking it on the chin now, but I think it has a long way to run, and that's Plug," which makes batteries for electric vehicles, Sanchez said. "That is a big market. They're in one particular part of the market, but it's a broad market that the Biden administration has basically made an enormous commitment to with their clean energy effort. And so, I think that's probably, of this whole heap, one of the IPOs that's getting hit in the chin, but probably has a lot of legs to it."
