Sept. 15, 2020, was the much-anticipated JFrog IPO. The stock began trading on the Nasdaq at $44 and gained around 50% for the day.
This was the same day as the Snowflake IPO. It was called "the biggest software IPO of all time" by CNN. That stock more than doubled from its IPO price.
If Snowflake hadn't happened, you'd probably be hearing more about JFrog. Next to the Snowflake IPO, it has been one of the more talked-about "unicorn" IPOs of 2020.
Though JFrog might not have set any records in its first day trading, it's still one of the most exciting stocks trading today.
JFrog joins a slew of tech IPOs underway such as Unity, Asana, SumoLogic, and Palantir. Companies have been hesitant to test the public markets during a global pandemic. But the handful that have announced IPOs are getting the hype they were looking for.
The JFrog public offering was 11.6 million shares totaling $510 million. Now, it trades on the Nasdaq under the ticker symbol FROG.
Now, the only question is: When's the best time to buy JFrog stock?
First, let's talk about why the JFrog IPO looks promising to so many investors.
Why Everybody Wants JFrog Stock
Snowflake got everyone's attention for being a uniquely low-maintenance, easy-to-install cloud platform.
JFrog's product offers a similar benefit. This company makes what is called "Liquid Software."
The idea behind Liquid Software is that your machine ideally would never have to pause or restart for software updates.
Instead of updates being broken up and bundled, JFrog helps software developers deliver updates continuously. Everything happens in the background.
The implications are huge for software companies looking to maximize ROI.
For example, think about how much business is lost when a high-traffic website goes down for maintenance. It could be thousands of customers, which could represent millions in revenue.
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JFrog gives developers an end-to-end solution loaded with features that can cut the cost and time of delivering software updates to users around the world. This means any software developed with JFrog's platform wouldn't have to go out of commission and potentially lose customers.
Cybersecurity software can especially benefit from this, as cyberattacks grow more commonplace. Banks and government agencies holding super-sensitive information don't want their cyber-defense down for even a second.
That's why companies like Alphabet Inc. (NASDAQ: GOOGL) and Microsoft Corp. (NASDAQ: MSFT) depend on JFrog. It's possible that, soon, everyone who doesn't have JFrog will be risking their reputation.
That's probably why JFrog has been a relatively solid startup from a financial standpoint thus far…
A Look at JFrog's Financials
JFrog increased revenue by 65% in 2019, from $63 million to $104 million. It managed to grow by nearly the same amount through the first six months of 2020, up to $456 million from $69 million in revenue.
Between 2016 and 2018, JFrog increased its revenue by 500%. By 2025, it hopes to hit $1 billion.
The company has also been unique for a startup in how fast it's cut losses. JFrog was founded in 2008.
While companies as young as JFrog are typically in spend-mode, the company has managed to lower total losses from $5 million in 2019 to just $426,000 today.
It has seen quarters of profitability. And if it continues to have success, winning big clients like Alphabet and Microsoft, it will be profitable.
Seventy-five percent of its 5,800 clients are Fortune 100 companies. It is currently over $5.75 billion in market cap, and sky's the limit if it continues to grow beyond that.
JFrog is sitting on $170 million in cash and short-term investments, with no debt.
Everything looks favorable for this company. Here's whether you should buy JFrog now, or wait…
When Should You Buy JFrog Stock?
We've talked a lot about how IPO investing can artificially inflate a stock price. Often, the effects of that don't necessarily disappear the next day.
After hitting a high of $276, Snowflake took a dip down to $226 at the end of the following trading day. That was a solid 22% dive.
JFrog had a less dramatic sophomore slump, with a 7% loss from a high of $69 on its first day.
Both stocks could have further down to go.
An example we always use is the long descent of Lyft Inc. (NASDAQ: LYFT) from $78 to $31. It's been a steady 60% decline over the course of a year and a half.
Of course, JFrog has plenty more going for it than Lyft does. The company has much better control of its niche.
That shows in its financial success, which is largely due to impressing some of the biggest companies in the world with its software.
Like Snowflake, JFrog is no doubt a long-term buy if you want to grab a piece of the surging cloud industry.
But if you're really concerned about saving money and getting in at the right time, it can't hurt to wait a while and see what the stock does. This will help you separate the hype from what's real.
If the company is really the powerhouse that it looks like, you only gain from getting the stock at a discount. If, instead, the stock appreciates over that time, you only have much more to gain in the years to come.
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About the Author
Mike Stenger, Associate Editor for Money Morning at Money Map Press, graduated from the Perdue School of Business at Salisbury University. He has combined his degree in Economics with an interest in emerging technologies by finding where tech and finance overlap. Today, he studies the cybersecurity sector, AI, streaming, and the Cloud.