Is Twilio Inc's (TWLO) Huge First Day a Sign of What's to Come?

Twilio Inc (TWLO) is surging up the charts in its first day of public trading

by Kirra Fedyszyn

Published on Jun 23, 2016 at 3:45 PM

Today is the first day of public trading for Twilio Inc (NYSE:TWLO), a developer of cloud-based communications software. The company, already labeled a "unicorn" with its private valuation of over $1 billion, raised $150 million in its initial public offering (IPO) of 10 million shares, priced at $15 each -- higher than the expected $12-$14 IPO price range. The stock is already making big waves today, opening at $23.99 -- a 60% premium over its IPO price -- and has soared even higher since, last seen up 86.6% at $28.02.

Of course, a big first day is no guarantee of future success. Schaeffer's Senior Quantitative Analyst Rocky White compiled some data on stocks that have had notable IPOs in recent years, along with their first-day returns, returns over the next three months, and returns to the present.

Best First-Day Returns1

Topping the list with the largest first-day return (calculated from the difference between its first-day closing price and its IPO price) is Qihoo 360 Technology Co Ltd (NYSE:QIHU), which hit the market in 2011. The stock added a whopping 134.5% from its IPO price by the end of day one, but the shares couldn't keep the same momentum going in the following months. In fact, three months after its debut, QIHU had shed more than 42%. Traders who kept the faith were eventually rewarded, though -- the stock surged higher through 2013 and early 2014, and now boasts a return of 417.8% over its initial IPO price of $14.50, trading at $75.21 today.

Worst First-Day Returns1

On the other side of the coin, XPO Logistics Inc (NYSE:XPO) hit the market in 2002 with an IPO priced at $15.75 per share. But on its first day, the stock gave up nearly 80%, ending the session at $3.20. Now, XPO is trading 78.3% above its IPO price, at $28.08.

Taking a slightly different view, one of the stock's with the most impressive total returns since its IPO in recent years has been Chipotle Mexican Grill, Inc. (NYSE:CMG). Though the stock has been troubled by food-borne illness woes since last fall, CMG's current value of $408.70 sits a whopping 1,757.7% above its IPO price of $22 in 2006. And CMG, too, started out with a bang, exactly doubling in price during its first day of public trading.

Among the worst returns-to-date from its IPO? Groupon Inc (NASDAQ:GRPN), which at $3.35 has given back more than 83% of its value since its $20.00 IPO in late 2011. GRPN gained 30.6% during its first day in the markets, but peaked just a month later, sinking to less than $3 by the end of its first year of public trading.

So what does all this mean for TWLO? The truth is, judging popular stocks by their first-day return doesn't present a clear pattern, nor a promise of future returns (just ask Etsy Inc (NASDAQ:ETSY), which popped 87.5% in its first day, only to give it all back and more in just over a year). But Twilio Inc's (NYSE:TWLO) notable first day on the market will surely have the stock on traders' radar for quite some time.

Let us help you profit from market volatility. Target big gains in short order with a 30-day trial of Schaeffer's Weekly Volatility Trader!

a schaeffer's exclusive

PLAY TRENDS LIKE A PRO!

5 tips to leverage profits in this FREE insider report!


 
 

Partnercenter


NEW! Explore Schaeffer’s Partners' deals and get connected to top online brokerages with deals tailored exclusively for our readers.  Get answers to your questions regarding transfer fees, commission rates, programs and available discounts related to online trading services.

MORE | MARKETstories


The IRS Loopholes Retirees Need to Know
Click to continue to advertiser's site.
Another Week of Fresh Highs Amid U.S.-China Trade Developments, Earnings
Developments on a trade deal between the U.S. and China were closely followed this week
Call Traders Blast These 2 Surging Stocks
Both stocks are enjoying record weeks
The IRS Loopholes Retirees Need to Know
Click to continue to advertiser's site.