Throughout the year, CNBC’s Jim Cramer has characterized the latest class of initial public offerings as a thorn in the stock market.
In recent months, he suggested the 2019 IPO cohort flood was a bigger threat to the market than the U.S.-China trade war, berated underwriters for the number of equities that stumbled out of the gate and warned that valuations would fall dramatically.
On Thursday, the “Mad Money” host said he has turned positive on a handful of these stocks. He endorsed them for declining to more enticing prices.
“This year’s IPO market has been a real roller coaster, but now that the dust has settled and many of these newly minted stocks have come down, I’ve got to tell you: I like Levi’s,” he said, “Kontoor, Lyft and Revolve right here, right now.”
Levi Strauss & Co
After going private for more than three decades, iconic jeans brand Levi’s in May relisted on public markets. The stock IPO’d for $17 in March and peaked at about $24 a share in April. Cramer initially recommended it as a buy at about $18 a share in late July, but the stock dropped to almost $16 in mid-August.
Levi shares have since bounced 21% from its bottom, closing Thursday at $19.52.
“At this point, I think Levi’s is still worth buying,” Cramer said. “I think the forecasts for 2020 and 2021 could prove to be low, which means Levi’s likely has more upside going forward.”
In May, VF Corp, which has a portfolio of apparel and footwear brands, spun off its denim division Kontoor Brands. The company, the parent of Lee, Wrangler and Rock & Republic jeans, opened on the market just under $40 a piece, slid to nearly $26 in June and did not close above $40 again until late October.
Cramer recommended it in late July at about $29 for its dividend, which currently yields about 5.6%. The stock has grown about 37% in value since then, closing Thursday at $40.22.
“Obviously Kontoor’s much less of a slam dunk after this move, but the dividend remains attractive and it is still fairly cheap,” he said. “It only sells for 10.6 times this year’s earnings. I say stick with it, but remember: apparel seems” to swing on U.S.-China trade and retail news.
Confetti falls as Lyft CEO Logan Green (C) and President John Zimmer (LEFT C) ring the Nasdaq opening bell celebrating the company’s initial public offering (IPO) on March 29, 2019 in Los Angeles, California. The ride hailing app company’s shares were initially priced at $72.
Mario Tama / Getty Images
Lyft was the first highly anticipated IPO of the 2019 cycle. The ride-hailing company priced at $72, first traded for about $87 — peaking that day at $88.60 — and for months trended downward before bottoming at roughly $37 per share in October.
Lyft’s stock lockup period, where pre-IPO investors are restricted from trading the equity, expired in August, which was a key reason Cramer issued a buy call on the security in early November. With the stock then at about $42, the host was convinced it put in a bottom at its October low.
“I think the fundamentals here remain intact. Until something goes wrong or the stock goes substantially higher, we’re going to stick with Lyft,” Cramer said. “With the stock trading at roughly three times sales … I think the valuation’s actually pretty reasonable. Lyft delivered 63% revenue growth in the most recent quarter. That’s pretty terrific.”
Online retailing platform Revolve Group made its public debut in June, going for $18 in the IPO and flipping for $25.16 a share in its first trade. As the retail part of the market dragged through the year, Cramer moved to recommend Revolve in August at $22.10.
The host admitted he made an unfruitful call as institutional investors rotated out of growth stocks. Revolve shares are down 20% as of Thursday’s $17.66 close. The stock, however, does appear to have bottomed near $14 in November. It peaked at $48.36 in a June intraday trade.
“It’s absurdly cheap, frankly, selling for 17 times the 2021 estimates,” the host said. “I think it’s going to be a terrific stock in 2020.”