Fortunes were made and lost by investors who remember the heady days of 1999, with the dotcom boom and the subsequent bust.
Late last year the ASX enjoyed a mini tech boom again with a number of small technology stocks including Moko Social Media Ltd (ASX: MKB), IBuy Group Ltd (ASX: IBY) and Mint Wireless Limited (ASX: MNW) all enjoying surges in their share price. Many of these stocks have now retraced from their 52-week highs and are currently trading near their 52-week lows.
Another stock which has substantially pulled back from its yearly high is XERO FPO NZ (ASX: XRO). In September 2013 the stock was trading around the $17 level. It then proceeded to rocket to over $40 a share, before beginning a slow and steady decent back to around $18.50 where it currently trades. Despite the pullback, the stock is still showing a rise of 13% in the last 12 months and an impressive 303% gain since listing on the ASX in November 2012.
An enduring business…
The key (and equally the difficulty) to investing within the technology sector is the ability to foretell the future. Accurately predicting which company has a new, cutting edge product or service that will grow significantly to justify purchasing the stock at what nearly always looks to be an inflated price is certainly no easy task.
New Zealand-based Xero which has developed an online, cloud-based accounting software system also trades at a hefty price. However what makes Xero more appealing than many other tech stocks is that the firm already boasts around 200,000 customers and has achieved an annualised revenue rate of NZ$100 million. This can provide some comfort to investors that Xero has an enduring business.
The catch
Xero is having significant success at growing its user base – this hasn't gone unnoticed by investors and herein lies the catch…the price. The company is commanding a market capitalisation of $2.5 billion!
On the face of it, this is a big price for a loss-making company, however if Xero can further monetise its customer base the profit dynamic of this tech growth stock becomes very exciting. With a potentially compelling product offering and strong acceptance rate amongst customers, Xero could turn out to be the tech growth stock of the decade.
