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Another IPO became available on Robinhood Markets Inc. (NASDAQ: HOOD) this week. Cue Health stock will trade on the NASDAQ as early as Friday, Sept. 24. You can find it under the ticker "HLTH."
Thanks to Robinhood, you can own it even sooner than that. That does not necessarily mean it's a buy, though...
Today we'll share whether or not to buy Cue Health IPO shares.
The stock is expected to trade in a range between $15 and $17. As there are 12.5 million shares of common stock, that makes around a $244 billion IPO in total.
Chances to buy IPO stocks come few and far between if you're not a venture capitalist or banker. That always makes these Robinhood IPOs enticing for retail investors.
And you can't argue with some of the results of previous Robinhood IPOs this year. Figs Inc. (NYSE: FIGS) soared from $22 a share to $50 in its first month trading, a 127% gain.
Clear Secure Inc. (NASDAQ: YOU) is still up 30% since it started trading.
Both Figs and Clear Secure went through Robinhood's IPO Access platform.
Here's where Cue Health falls in the grand scheme of things...
What Is Cue Health?
Cue Health is a medical technology company specializing in diagnostic testing. It's big right now, thanks to COVID-19. It got a massive revenue spike from rapid COVID-19 molecular diagnostic test demand.
In fact, the San Diego-based company locked down a $13 million government contract for its technology at the start of the pandemic.
But this company is not limited to testing.
Cue Health's IPO prospectus says the company aims to offer a more fluid virtual healthcare experience to patients. It will do it through its "Cue Integrated Care Platform," designed to "bridge the physical to virtual care continuum."
The platform gives patients an interface where they can view all of their diagnostics in one place and even talk to their doctors via video chat if necessary.
Cue wants to give customers everything they need to get healthcare via phone, getting as close as possible to an in-person visit.
Cue Health was founded in 2010 but has grown fast. It has 1,000 employees and patients in five facilities.
Partners include big names like Mayo Clinic, Johnson & Johnson (NYSE: JNJ), the National Basketball Association, and the Women's National Basketball Association.
No doubt, clout matters in any industry, and Cue Health has it. But another important factor in deciding what stocks to buy is profitability...
Is Cue Health Profitable?
Cue Health is still a very small, young company. But the revenue boost from COVID-19 has turned it around from a $47 million loss in 2020 and a $20 million loss in 2019, according to its SEC filing.
Its net income was $46 million in just the first six months of 2021.
Revenue in 2019 was $6 million, compared to $22 million in 2020. For the six months ended in June 30 of 2021, revenue was over $200 million. That's 809% revenue growth in just half a year.
The company admits in its prospectus that it has "incurred significant losses" since inception and "only recently started generating revenue from commercial sales."
With so much mystery around the future of COVID-19, it could paint an unclear picture for the future necessity of diagnostic tests. And given the fact that this company is still early in its growth, it will be spending money on expansion. That could make profits fluctuate quarter to quarter.
That said, whether demand for COVID-19 tests waxes or wanes, the fact that it is delving into telemedicine shows it is dialed into the latest medical needs.
Cue Health's contract with the U.S. Department of Defense is also a huge plus for the company, opening doors to potential future partnerships and regularly occurring revenue streams.
Finally, let's find out whether you should buy Cue Health IPO shares or not...
Should You Buy Cue Health Stock?
We've said this before, and it stands true today. Any opportunity to get in on the ground floor of an up-and-coming firm is rare for retail investors.
Robinhood gives us a chance to play with the big cats. Retail traders can request to be randomly selected for IPO investing. And those shares could potentially double, triple, or soar to the moon in a matter of days.
Of course, that is exactly what makes IPO shares so risky. You could watch a stock 10X within a few days of trading then plummet to zero after that. First-day prices can sometimes be overblown by market sentiment - and boy, is market sentiment more of an impact than ever today.
Recall the short squeezes in GameStop Corp. (NYSE: GME) and AMC Entertainment Holdings Inc. (NYSE: AMC) in early 2021, driven mostly by internet traders like the ones that will be buying into this stock. Robinhood is the common denominator here.
The same people that pumped GameStop can pump Cue Health, and they can drag it down just as fast when they take their profits.
A stock on Robinhood already makes it news. The fact that it's relevant to our current COVID-19 woes makes it even more so. That will cause Robinhood traders' ears to perk up.
That doesn't mean the stock will flop. But you want to be vigilant and stay on the lookout for potential volatility.
The obscene level of competition in the medical field is another source of long-term volatility, which makes for a super-unpredictable IPO.
That's why, if you're thinking of buying Cue Health, we can't recommend a long-term hold. If you do pick up shares, on the other hand, you're gambling.
Gamblers have succeeded before. But you've been warned.
One Stock to Buy Instead of Cue Health
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.