The newly-listed Myob Group Ltd (ASX: MYO) has been unable to avoid the market's broad selloff with the stock having retreated 6% from its opening price on Monday.
The accounting software provider opened at $3.91 on Monday which represented a 7% premium to its $3.65 initial public offering (IPO) price. While it initially climbed as high as $3.92 the stock has since fallen back to its IPO price leaving early investors somewhat disappointed.
Indeed, it's been a terrible week for the Australian sharemarket in general so it's perhaps no real surprise that MYOB has also been sold off. But investors might be wondering whether or not there are also other forces at play.
MYOB was the biggest – and most highly anticipated – float since that of Medibank Private Ltd (ASX: MPL) last year. While early reports suggested that its growth story was well received as management embarked on a three-week roadshow prior to the IPO, those accounts were confirmed when its shares listed at the higher end of its indicative price range (provided in its prospectus) due to high demand.
But some analysts have expressed their concerns regarding the stock's valuation, suggesting that the company's current price is a reflection of the best case scenario whilst ignoring the potential risks. Indeed, one of the key risks facing MYOB is the hot competition from the likes of Reckon Limited (ASX: RKN) and XERO FPO NZ (ASX: XRO) which is, by all accounts, gobbling up market share locally and abroad.
While it is of course still early days to suggest MYOB's shares have already peaked, investors do need to be cautious of the price they are willing to pay for the stock. Even at $3.65, MYOB looks expensive and Xero could well be the better long-term bet (notably, its shares are also down 6% over the last three days).
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