Is Procore Stock a Buy Despite the Slow IPO Market?

This company might change the construction industry forever. And it may be going public at just the right time. Here's why you should look out for Procore stock this week...

Procore was recently given a potential price in the $60 to $65 range for its IPO. And now we get to see what the market actually thinks.

The Procore IPO process was initiated more than a year ago, when IPOs were on fire. Total 2020 IPO valuations came to $145.3 billion, according to Statista. That was more than double the previous year's $56.2 billion.

Unfortunately, Procore's February 2020 filing with the U.S. Securities and Exchange Commission was delayed by the pandemic. It was unclear how lockdowns would affect the IPO market at that time. Today, we can say 2020 was a much hotter IPO market than 2021 so far.

Investors right now are more conservative than they were during the pandemic. Rising inflation and other unknowns could put a lid on buying stocks.

Let's talk about how Procore stock could perform this week and whether it's a buy after the IPO.

What Is Procore?

Procore is a construction management company based in Carpinteria, Calif. The company offers software that helps construction managers get a bird's-eye view of their projects.

It's billed as the most "comprehensive" construction management tool out there.

This is a tool created by a construction manager, for construction managers. CEO Craig "Tooey" Countermanche was inspired to create the tool after struggling to manage a home construction.

In the past, construction managers have had to rely on a custom suite of different tools for different purposes. For example, they might manage personnel on one app while keeping track of official documents and photos of the build on another app.

These variables can significantly affect forecasts for how long jobs will take and how much they will cost. Procore boasts a 70% increase in forecast accuracy and a 76% reduction in non-recoverable change on its projects.

Ultimately, that means more happy customers. And that has been evident in its growth over the last decade.

Here's what the company has been up to.

What Procore's Successful Private Run Tells Us

Procore unveiled some financials in its first IPO filing in 2020.

Back in 2019, the company recorded a net loss of $82.1 million. There's a good chance at profitability for this stock, however, with how fast this company has grown.

From 2012 to 2019, revenue has soared from $4.8 million to $289.2 million - that's 5,925% growth over seven years. Today, the platform has over a million users.

Procore has been successful in the venture capital market, raising over $500 million from private investors like Tiger Global, Dragoneer, D1 Capital and more. Even when its 2020 IPO was delayed, the company was held over by a $150 million venture capital infusion. Back then, the company was expecting a value of $5 billion.

Now, Procore expects to raise $616 million and be valued at $8.3 billion market cap after the IPO, if the stock is priced at the $65 mark. It will offer 9.47 million shares.

With such massive growth over the last few years, and venture apparently loving the stock, here's whether or not you should wait to buy Procore stock.

Is Procore Stock a Buy After the IPO?

Institutional investors seem to like Procore stock, and the retail market will probably favor it as well. That's thanks to a broad trend we expect to see over the next several years.

We've witnessed the demand grow for a tool such as Procore over the last decade. And it still appears to lead against competitors like Bluebeam Revu in providing a "comprehensive" construction management solution.

According to Deloitte, industries spend an average of 3% on IT every year. The construction industry lags behind the average at just 1.7%. Procore is changing that by proving its utility, and we may see IT spending increase in the construction industry over the next decade.

Right now, more demand is being created by the public sector. As expected, the White House is working to pass a $2.3 trillion infrastructure bill through Congress. That means new construction projects, big ones that will no doubt benefit from an all-in-one construction management platform like Procore.

The company's yearly subscription fees go up based on each customer's construction volume. Whether it's the federal government or a government contractor paying for the tool, the volume of construction is going to be a lot of money in Procore's pocket.

Even beyond that, Procore stands to gain from the current shortage in housing inventory. Condos and housing developments will go up to meet demand over the next few years.

There is plenty of opportunity for Procore to grow its userbase and increase its cost. For these reasons and more, it's almost certainly a buy whenever you can get shares.

See how stocks price first. If they go above the $65 range, you might want to wait until the hype fades to go in.

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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.

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