The initial public offering (IPO) market is officially back, featuring several analyst favorite stocks. After two extremely difficult years for new entrants, the risk appetite has dramatically improved with the U.S. stock market hitting record highs in recent weeks.
Colin Stewart, Morgan Stanley’s (NYSE:MS) global head of technology equity capital markets, has forecasted a resurgence in the tech IPO market. According to Stewart, the sector could see 10 to 15 companies going public before the end of 2024, with prospects looking even brighter for 2025.
After a two-year downturn due to high inflation and rising interest rates, the IPO market is showing signs of revival. Colin Stewart notes the recent successful tech IPOs, following a period of quiet and reduced valuations, are promising indicators for future offerings, signaling a recovery from the slump that began in 2022.
Signs of a market rebound emerged earlier this year with notable IPOs, including Reddit’s debut, marking the first major social media platform to go public since Pinterest (NYSE:PINS) in 2019, and Astera Labs (NASDAQ:ALAB), whose shares soared, especially with investor interest in artificial intelligence-related ventures.
Stewart mentioned that the six-month IPO process might lead companies to delay public offerings until 2025 to avoid the U.S. presidential election cycle. He noted that market valuations have stabilized to levels seen in 2018 and 2019, encouraging more companies to go public.
Despite these positive developments, Stewart acknowledged that the most valuable, late-stage tech companies, including SpaceX, Stripe, and Databricks, are not yet moving towards IPOs. These companies continue to receive significant investor capital and are focused on long-term investments, with public offerings not being an immediate priority.
Let’s now take a look at the top three analyst favorite stocks that are capturing Wall Street’s attention this month.
Rubrik (RBRK)
Rubrik (NYSE:RBRK), prominently featured among Wall Street’s analyst favorite stocks, has received overwhelming support with nine Buy ratings and one Neutral. The company, backed by Microsoft (NASDAQ:MSFT), specializes in cloud data management, providing essential data backup, recovery, and protection solutions for enterprises.
Initiating coverage of Rubrik with an Overweight rating, KeyBanc Capital Markets highlighted the company’s solid position in the backup and recovery market and its expanding data security platform. They anticipate Rubrik will capture more market share in the $11 billion sector, emphasizing the need for cyber resilience and the urgency for enterprises to upgrade from legacy systems amidst escalating ransomware threats.
KeyBanc has set a 12-month price target for Rubrik at $46, citing the company’s potential to excel in Data Security Posture Management and further penetrate the Chief Information Security Officer’s domain.
Truist Securities also started its coverage on Rubrik by assigning a Buy rating and a price target of $43. Truist praised Rubrik’s Zero Trust Data Security strategy for providing strong defenses against cyber threats and disruptions. The firm is optimistic about Rubrik’s Software as a Service transition and projects at least a 40% revenue growth through the fiscal year 2026.
Similarly, Barclays (NYSE:BCS) started coverage with an Overweight rating and a $41 price target.
Marex Group (MRX)
The Marex Group (NASDAQ:MRX) received seven new ratings across Wall Street with all Buy or equivalent. Marex is a global financial services company providing market access, liquidity, and risk management solutions. They serve a diverse client base, including commodity producers, consumers, traders, and financial institutions.
Among those that initiated research coverage on Marex is the Swiss financial giant UBS. The brokerage firm set a price target of $27.00. UBS sees Marex as an opportunity to invest in the growing global derivatives market, which is expected to expand at a high single-digit rate.
The broker anticipates that Marex will outperform the market by leveraging its scale and making further acquisitions. Although the company’s exposure to interest rate fluctuations is seen as a potential challenge, UBS believes this risk is already reflected in Marex’s current share price.
Citi (NYSE:C) also initiated coverage with a Buy rating, highlighting Marex’s strong niche positioning and potential for market share gains. The analysts pointed to Marex’s diversified business model, which includes clearing, agency/execution, market making, and hedging/investment solutions, as a source of competitive advantage.
The potential for regional expansion and a focus on commercial clients were also noted as positive factors. While acknowledging risks related to counterparty interactions, market conditions, and principal activities, Citi concluded that the positives outweigh the potential challenges at the company’s current valuation.
Loar Holdings (LOAR)
Loar Holdings (NYSE:LOAR), one of the analyst favorite stocks, is a private investment firm specializing in the aerospace and defense industries. They acquire and manage companies providing critical components and services for aircraft and defense systems. The stock received two new Buy or equivalent ratings on Wall Street in May.
RBC Capital (NYSE:RY) initiated coverage on Loar with a positive outlook, assigning the aerospace company an Outperform rating and setting a price target of $60.00. RBC Capital highlighted Loar’s substantial aftermarket profits, which make up approximately 70% of its earnings, as a significant strength.
The broker anticipates that Loar will benefit from the current robustness in the commercial aftermarket sector. Morgan Stanley also began coverage on Loar, but with a more cautious stance, issuing an Equa-lweight rating and a price target of $55.00.
The firm pointed out that Loar’s product portfolio is largely based on proprietary content, expected to represent about 85% of its revenue in 2023, and a strong aftermarket exposure, projected to account for roughly 52% of its revenue in the same year.
On the date of publication, Shane Neagle did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
