updated 12/8/2006 6:12:56 PM ET 2006-12-08T23:12:56

Heelys Inc., riding on its popular roller-skating street shoes, made its Wall Street debut on Friday, turning its sizzling sales momentum into an 85 percent jump in its stock.

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The shares rose as high as $38.75 after opening up 44 percent at $30.30 on Nasdaq, a day after they were priced at $21 each, above an estimated range.

The gains placed the debut among the top 10 first-day gainers of the year, according to data tracker Dealogic, as the stock closed up 55 percent at $32.50.

However, analysts question how long Heelys can maintain its lofty heights with its narrow product line and market.

“Right now it’s hot as a pistol,” said John Shanley, senior analyst at New York-based Susquehanna Financial. “You have a product very much aimed at one specific customer segment, young boys, who tend to be fickle about what is hot and what is not.”

But it has a very limited audience in terms of consumers buying the product.”

Plenty of holiday wish lists are expected to include Heelys’ patented shoes which conceal a wheel in each heel and allows wearers to skate by angling their feet.

Net sales of the Carrollton, Texas-based company doubled during the first nine months of the year from all of 2005, after already doubling from 2004.

Analysts had expected a strong debut for Heelys based on its exponential sales growth and the previous IPO successes of Crocs Inc., with its unique resin clogs in bright colors, and other apparel companies, such as Under Armour.

Under Armor almost doubled in its 2005 market debut, closing its first day up almost 95 percent at $25.30. The shares closed 43 cents higher at $50.86 on Friday.

Crocs saw its stock soar 30 percent from a $21 IPO price on its first day of trading in February. It edged up 48 cents to $43.09 on Nasdaq on Friday.

Under Armour trades at almost 64 times annualized 2006 earnings while Crocs has a price-to-earnings ratio of about 28 times, based on Reuters Estimates.

At $33, Heelys trades at about 38 times earnings, according to annualized data in documents filed by the company with the U.S. Securities and Exchange Commission.

However, Crocs expanded its offerings and reaches a wider market, Shanley said.

In 2005 and the first nine months of this year, Heelys generated about 95 percent and 99 percent of net sales from the shoes, according to IPO documents filed with the SEC.

Heelys will need to broaden its product appeal to prove it can continue its growth, said NPD Group retail analyst Marshal Cohen.

“They have to prove they are more than a one trick pony,” Cohen said. “I see short-term gains with long-term challenges.”

The company, which increased the size of its IPO from an initial 6.25 million shares, plans to use the proceeds for product development, as well as working capital, general corporate purposes and to hire employees, according to the SEC documents.

The company raised almost $135 million on Thursday with the 6.425 million share IPO that sold for $21 per share compared with a $16 to $18 forecast range.

Underwriters led by Bear Stearns & Co. and Wachovia Securities have the option to buy another 937,500 shares to cover overallotments, according to the SEC filing.

Copyright 2012 Thomson Reuters. Click for restrictions.

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