The IPO market keeps showing signs of strong momentum. The latest hot deal is Fusion-io (NYSE:FIO), which saw its price range bumped from $13-$15 to $16-$18 and then priced at $19. So far in Thursday’s trading, the shares are up about 30%.
Founded in 2005, Fusion-io develops next-generation storage memory for data centers. Instead of using disk drives, the company leverages chip-based systems. It’s a transformative approach, which can boost performance by as much as 10-fold and provide for substantially lower energy costs. Keep in mind that that the company’s chief scientist is Steve Wozniak, a co-founder of Apple (Nasdaq:AAPL).
As testament to the technology, Fusion-io has partners like Dell (Nasdaq:DELL), Hewlett-Packard (NYSE:HPQ) and IBM (NYSE:IBM). In fact, there are more than 1,500 customers that rely on real-time applications, including Apple and Facebook.
As a result, the growth rate has been torrid. For the last nine months, revenue was $125.5 million, up from $25.2 million. The loss also narrowed to $1.2 million from $19.8 million. In other words, the company is benefiting from operating leverage.
Fusion-io does have significant customer concentration, with its largest 10 accounting for more than 90% of revenue (Facebook represents about 47% of this).
What’s more, the valuation is not cheap, coming to about $2 billion. That’s roughly 14 times revenue.
Yet it is certainly much cheaper than LinkedIn (NYSE:LNKD). Besides, when it comes to hyper-growth companies, valuations will nearly always be at a premium.
However, as with any new IPO, it is still a good idea to wait a month or so for the trading to settle down. But Fusion-io looks like a good way to play the some of the hottest trends in tech.
Tom Taulli’s latest book is “All About Short Selling” and he has an upcoming book called “All About Commodities.” You can find him at Twitter account @ttaulli. He does not own a position in any of the stocks named here.
