Shareholders in many of the big name tech growth stocks finally had something to cheer about on Thursday, after many of these former market darlings were amongst the biggest price climbers on the ASX200. The recent global sell-off of equities has seen most international markets tumble into correction territory, and many of the sexier, headline-grabbing tech stocks have been hit especially hard. So it was pleasing to see some of these growth stocks rally sharply on Thursday. Shares in buy now, pay later fin-tech company Afterpay Touch Group Ltd (ASX: APT) led the pack, surging 8.7% higher. But printed circuit…
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Shareholders in many of the big name tech growth stocks finally had something to cheer about on Thursday, after many of these former market darlings were amongst the biggest price climbers on the ASX200. The recent global sell-off of equities has seen most international markets tumble into correction territory, and many of the sexier, headline-grabbing tech stocks have been hit especially hard.
So it was pleasing to see some of these growth stocks rally sharply on Thursday. Shares in buy now, pay later fin-tech company Afterpay Touch Group Ltd (ASX: APT) led the pack, surging 8.7% higher. But printed circuit board developer Altium Limited (ASX: ALU) wasn’t far behind, climbing 8.6% higher. And finally, WiseTech Global Ltd (ASX: WTC) rounded out the top 3, with shares in the logistics software company jumping 6.5%.
The big question now is whether these strong performances are a sign of better times ahead? Let’s look at each of these three stocks, in turn, to see if we can make any predictions for their future performance.
What happens next with Afterpay is really anyone’s guess. After surging to an all-time high of $23 in late August, the Afterpay share price has swung around wildly but generally trended way down, briefly dropping below $11 last week. However, Thursday’s price surge continues an impressive run in which Afterpay shares have rallied 22% since the market opened on Monday.
Where to from here is tough to predict. A company announcement earlier this month revealed Afterpay’s expansion into the US was progressing rapidly, with over $115 million worth of underlying sales already having been processed through the platform and partnership agreements reached with big name American brands including Steve Madden, Skechers, and Urban Outfitters.
But back home the regulatory threat from an impending Senate inquiry into the buy now, pay later sector, which also includes Zip Co Ltd (ASX: Z1P), means that shareholders can probably expect more short-term price volatility.
Altium is one of my favourite tech stocks. The company specialises in software for the design of printed circuit boards (PCBs), which are an integral component to just about every electronic device. Altium has put over 30 years’ worth of R&D into its PCB software and hardware and is fast becoming a market leader. Plus it has no debt on its balance sheet and it relies on a subscription-based revenue model – over half of the $140 million worth of revenues it brought in in FY18 was recurring. Both these factors help to reduce volatility in its earnings and stabilise its share price.
All that being said, Altium shares were still hit just as hard as any of the other tech stocks during the recent global rout, and its current price of $23 is well off its August high of $30.51. However, I believe its share price will recover and the current dip could present a good buying opportunity. The company’s longer-term outlook remains extremely bullish, with target revenues for 2020 of $200 million and plans to dominate its market by 2025.
WiseTech is another of my favourite tech stocks for long-term growth. Its share price has also been hammered recently, and at $18.67 is well short of its August high of $25. However, after it shot up an astonishing 50% in a matter of days due to the release of surprisingly strong FY18 results, a significant pullback was always going to be on the cards. Even now it still trades at a multiple of over 130x FY18 earnings, which could mean that further declines are to be expected, particularly if the market remains volatile.
However, WiseTech has continued to impress. The company has maintained its aggressive M&A strategy, most recently acquiring Swedish customs solutions provider CargoIT. It also upgraded its earnings guidance for FY19, and now expects revenues for FY19 of between $320 million and $333 million and EBITDA of between $102 million and $107 million. This represents high double-digit growth.
With market volatility becoming the new normal over the last couple of months it’s very difficult to make any firm predictions about which direction these tech stocks are headed in over the short term. For me, all three offer great longer-term growth potential and should eventually climb higher – but given the current stormy conditions of the global markets, you might have to be prepared to put up with a fair few bumps getting there.
Motley Fool contributor Rhys Brock owns shares of AFTERPAY T FPO, Altium, and WiseTech Global. The Motley Fool Australia owns shares of AFTERPAY T FPO, Altium, and WiseTech Global. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.