Image sharing social network Pinterest (PINS)and video conferencing company Zoom (ZM) both started trading Thursday after pricing their offerings above their initial range. Both stocks soared.
And Lyft (LYFT) archrival Uber is expected to make its Wall Street debut in May.
There is a lot of excitement about these unicorns -- startups with a valuation of at least $1 billion. But not every initial public offering is going to turn out to be the next Amazon (AMZN), Google (GOOGL) or Facebook (FB).
So what should investors hoping to pick a long-term winner be looking for when considering whether or not to buy any of these IPOs?
Patience is a virtue when it comes to IPOs
Steve Rhodes, editor of the Mastering Profitability market newsletter, said that average investors should wait several months before buying any new stock offering.
It's better to see what a company's first quarter or two of results as a public company look like.
Santosh Rao, head of research at Manhattan Venture Partners, agreed. But he thinks that investors will be rewarded over the long haul if they are patient and buy companies with clear momentum.
"Investing in IPOs are not for the faint of heart. But if you have a long-term horizon, you could be well off," Rao said. "Investors want growth...companies that are transformational."
It's worth pointing out though that new stocks that have a lot of hype also often stumble after their debut -- just as Lyft has done and Facebook famously did after its IPO in 2012.
Rhodes noted that Spotify (SPOT) and Snapchat (SNAP) are also examples of consumer-oriented IPOs that were widely heralded that have since experienced some growing pains.
With that in mind, Ed Lavery, investor solutions business manager with SimilarWeb, a company that tracks the performance of top apps, has higher hopes for Zoom than Pinterest.
Lavery noted that Zoom has continued to grow market share against top rivals like Cisco (CSCO)-owned WebEx and Microsoft's (MSFT)Skype while also posting a profit.
Pinterest, on the other hand, has struggled to grow users and is losing money. If that trend continues, Pinterest could be a long-term dud.
Shades of the late 90s
Renny Ponvert, CEO of research firm Management CV, said there are a lot of parallels to the IPO craze of the late 1990s -- companies are losing lots of money and touting market share gains.
That's a cause for concern. Ponvert added that investors should also be wary of companies that are giving founders supervoting rights over the company by issuing so-called class B shares.
It's a way for founders to maintain control even though they don't own a majority of the company. Ponvert said that's one reason why he's skeptical of Lyft and Pinterest.
Looking ahead for companies that could go public later this year, Lavery said Airbnb is the unicorn he's most excited about due to its rapid growth trajectory and likelihood that it will remain a market leader. The company doesn't face as much competition as Lyft and Uber do.
Palantir and Slack could be IPO stars
Ponvert also thinks that investors need to find a clear industry leader. And the one unicorn that he is most excited about is a company that has no presence in the consumer market.
"Palantir is the most interesting one I'm waiting for," Ponvert said, referring to the Big Data firm backed by Peter Thiel that has a private market valuation of about $20 billion.
Ponvert said that Palantir could be a huge hit because it's a company that relies on steady and recurring subscription revenue -- big contracts to businesses and governments as opposed to fickle ad sales or changing consumer trends.
Kelly Rodriques, CEO of Forge, a secondary market that lets people trade shares of private companies, also believes that companies with a greater focus on businesses look more attractive. He thinks messaging service Slack, which is planning a direct listing later this year, should do well.
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