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AvidXchange stock was the latest to go live on Robinhood IPO Access - the platform that gives retail investors a shot at IPO investing.
The company filed for IPO in September and recently set the terms for the offering. AvidXchange wants to sell 22 million shares in the range of $21 to $23 per share. If shares trade at the top of that range, that makes a $506 million IPO and values the company at $4.4 billion.
You will find shares of AvidXchange stock ticker AVDX on the Nasdaq shortly. But retail investors have a chance to grab shares right alongside the big wigs on Wall Street.
Robinhood Markets Inc. (NASDAQ: HOOD) randomly selects users who sign up for shares to be early shareholders. The program has already produced gains in Duolingo Inc. (NASDAQ: DUOL) and Figs Inc. (NYSE: FIGS), which popped as high as 100% and 185% respectively.
Of course, there have been some duds as well.
Here's where AvidXchange falls.
What Is AvidXchange?
AvidXchange is a payment platform founded in Charlotte, N.C., in 2000. It focuses on catering to the commercial sector, helping companies pay bills digitally through automation. This helps lessen the paperwork required by corporations to make financial transactions.
Companies can take advantage of digital payments, invoicing, and more.
So far, it serves over 7,000 customers in North America, helping them "cut costs, improve visibility, and increase efficiencies." They processed over $145 billion through the year 2020.
Mobile payments came in the clutch at the start of the COVID-19 pandemic. That helped AvidXchange fill its top line, giving one of the fastest-growing companies in America an additional revenue boost.
AvidXchange also boasts backing from Peter Thiel, founder of another super successful payments platform, PayPal Holdings Inc. (NADSAQ: PYPL). Another important investor is Mastercard, the credit card company.
Now, that's a lot of name-dropping. Here's whether it really counts toward filling the company's pockets.
Is AvidXchange Profitable?
AvidXchange did not report profits in its last report. For the six months ended June 2021, it made a net loss of $92.1 million on revenue of $113.9 million.
The good news is that this company is still young, and net losses tend to be more normal than not for growing companies. And when profits are down, you can look at other markers of potential success.
AvidXchange has one of those - revenue growth. In fact, revenue growth for AvidXchange has been phenomenal in the last year. In that last report, the company's revenue has increased from $85 million to $113 million, a solid 32%.
On the other hand, its net loss this year was bigger than the net loss the year prior.
But again, consider how new companies, especially one playing a central role in the "digital transformation" movement, need to spend aggressively on growth to compete over the next decade. In order to continue adding customers, this company may need to dig an even deeper hole which can only be filled later by customer retention.
That brings us to the ultimate question of whether AvidXchange can retain customers...
Should You Buy AvidXchange Stock?
AvidXchange stock has powerful names backing the company. It has grown fast over the last two decades to where it is now, and it will need to grow even more aggressively if it wants to remain dominant in its industry.
But the company will also have to do some tricky gymnastics down the road to remain competitive. Remember, while this company's product focuses on corporations, companies like Stripe and PayPal can do most of the same.
So, the answer for AvidXchange will be not only to grow aggressively, but to slide into a niche that allows it to either beat the other payment platforms or integrate with them.
There's plenty of opportunity for this in the global digital transformation market, which is expected to double from $469 billion to over $1 trillion by 2025 - more than double the value in five years.
The other thing that will make it hard for AvidXchange to compete is that Stripe and PayPal are both profitable companies. AvidXchange will be racing to increase its cash flow before the competition lights up even further.
Ultimately, the jury is still out on whether it's a long-term hold. To buy this stock would be to gamble a little bit.
However, opportunities for retail investors to buy IPOs are so rare, you may want to see if you can take part in the early IPO bounce and then sell right away for a nice gain. That's not guaranteed to happen, but it's happened more than you would expect with the IPOs Robinhood has chosen to include in its IPO Access line up.
If you're looking for a stock that is truly long-term-hold material, here's the one you should check out instead....
This Stock Could Triple Your Money
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.