Wall Street analysts mount rescue operation for slumping US IPOs

Three of the worst performers among US initial public offerings this year won much-needed support from Wall Street on Monday, with analysts warming to their post-selloff valuations.

Technology-driven insurance broker Ethos Technologies Inc., satellite manufacturer York Space Systems and Brazilian fintech firm PicS NV, won near-unanimous buy ratings from Wall Street analysts in their initiations on Monday. Their shares have lost between 17% and 42% of their value since their listings, which raised $1.26 billion in aggregate.

The companies’ underperformance stands in contrast to this year’s crop of debuts, which delivered a weighted average increase of about 16%, excluding blank-check firms and other financial vehicles, data compiled by Bloomberg show. By contrast, the benchmark S&P 500 Index is roughly flat this year.

Ethos, the worst performer among this year’s debuts, received buy-equivalent ratings from all nine firms tracked by Bloomberg that initiated coverage on Monday. With their average 12-month price target of $19.75 per share — just above the IPO price of $19 each — Wall Street now expects the stock to nearly double from Friday’s close of $10.80.

Ethos shares jumped 11% at one point on Monday before paring about half of those gains. As of 3:03 p.m. in New York, it traded at $10.91 per share, still down more than 40% from the IPO price in late January.

Ethos is a “unique” technology-forward insurance broker that trades at “a sharp discount to peers,” Barclays Plc analysts, including Ross Sandler, said in a note. Its software and marketing stack are highly differentiated and would enable high growth rates at attractive margins for the foreseeable future, they added.

“We believe the stock is compelling at its current valuation,” William Blair & Co. analysts, including Adam Klauber, said in a note touting the firm’s platform as transforming the life insurance market.

York Space also won bullish calls. Eight firms initiated coverage with buy equivalent ratings, while two others called for hold equivalent ratings. Their average 12-month price target of $38 implies roughly 30% return potential from Friday’s close.

“York Space Systems is a proven space and defense tech company,” Jefferies Financial Group analysts, including Sheila Kahyaoglu, said in a note, adding that order announcements could fuel the stock’s re-rating. The analysts had a price target of $37 with a buy rating.

The current valuation for PicPay, as the Brazilian firm is known, is also “compelling” according to Citigroup analysts, including Gustavo Schroden. The company continues to expand its client base in the Latin American nation, they said.

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