Cramer Previews Demandware IPO

When looking to profit from an initial public offering, Jim Cramer on Monday reminded his “Mad Money” viewers to “never confuse a trade with an investment.”

Be it Groupon or Yelp , many of the recent Internet IPOs were classic trades, Cramer said. In other words, these stocks were only worth buying if you could get in on the actual offering and then immediately sell in the after-market. Unfortunately, though, many investors couldn’t get shares in the IPO, so they bought shares in the after-market. That’s a major “no-no,” Cramer said.

Going forward, Cramer recommended investors consider other Web-based companies that are going public in the foreseen future. He thinks there are several undervalued IPOs on the way.

Take Demandware, for example, which will go public later this week and trade under the ticker symbol DWRE. Demandware makes cloud-based software that helps companies design and maintain their own e-commerce websites. E-commerce was a $316 billion business in 2010, Cramer said. It could swell to a $653 billion business worldwide, though, by 2015. The total market for cloud enabled e-commerce platform services is expanding with a remarkable 21.3 percent compound annual growth rate. It is estimated to grow from a $4.3 billion business in 2010 to $11.3 billion by 2015. Cramer likes Demandware has a subscription-based business model, too, because the subscriptions allow for a continual stream of revenue.

So how much should investors be willing to pay for Demandware?

“I want you in this deal when it prices on Wednesday night, provided it prices at below $15 a share,” Cramer said. “Anything more than that and there might not be enough juice to merit buying, even if the company's as terrific as we think it is.“

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