Outside the Box: Avalara’s IPO looks hot, but it’s overpriced

Avalara Inc., a provider of cloud-based tax compliance software, priced its IPO at $24 a share, well above its estimated range of $19 to $21 per share. We give the stock an Unattractive rating.

Avalara AVLR, +55.08% joins a long list of cloud software providers that fail to earn a profit at the time of their IPO. However, lack of profits hasn’t stopped investors from plowing capital into cloud stocks. For example, salesforce CRM, -0.12% is up 250% over the past five years (the S&P 500 SPX, -0.52% is up 75%) despite consistently generating negative economic earnings.

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