Shares of Savers Value Village (NYSE: SVV) slipped over 10% this week, according to data provided by S&P Global Market Intelligence. The recent entrant to the public markets had no big news to note, which means it is likely just suffering from the post-IPO malaise. At one point this week, shares of the stock were down over 15% before recovering on Friday.
Savers Value Village is a for-profit thrift store operator in the United States. People give the stores their old and used items that Value Village then sells to shoppers looking for big discounts. It went public earlier this summer with a market cap of $4 billion.
Today, its market cap is down to around $3 billion with the stock sinking over 20% in the last month. But there has been no recent news from the company, so why is the stock sinking? It’s simple. On average, recent IPOs underperformed the broader market, with 32% of new stocks trailing the market by more than 10% in the first three months after going public.
But why does this occur? There are likely two culprits. First, IPOs are generally priced for perfection, which can lead to a lot of underperformance as the business and stock prices eventually converge. Second, when a company goes public, there are a lot of shareholders who are looking to exit their positions. As they do, that can create downward pressure on the stock price for a short while.
Savers Value Village seems to be down simply due to market dynamics. But the business looks solid. In 2022, it generated over $200 million in operating earnings, which does not look crazy expensive versus its current market cap of $3 billion. If you believe that the thrift store industry has room to grow in the United States, Savers Value Village could be a stock to put on your watch list.
Now might not be the best time to buy shares with it still being so close to its public debut, but there could be a great buying opportunity in Savers Value Village for patient investors in the coming years.
10 stocks we like better than Savers Value Village
When our analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
They just revealed what they believe are the ten best stocks for investors to buy right now… and Savers Value Village wasn’t one of them! That’s right — they think these 10 stocks are even better buys.
*Stock Advisor returns as of September 11, 2023
Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
—
Blog powered by G6
Disclaimer! A guest author has made this post. G6 has not checked the post. its content and attachments and under no circumstances will G6 be held responsible or liable in any way for any claims, damages, losses, expenses, costs or liabilities whatsoever (including, without limitation, any direct or indirect damages for loss of profits, business interruption or loss of information) resulting or arising directly or indirectly from your use of or inability to use this website or any websites linked to it, or from your reliance on the information and material on this website, even if the G6 has been advised of the possibility of such damages in advance.
For any inquiries, please contact [email protected]
