Fund manager Jun Bei Liu from Tribeca investment partners said that she prefers Afterpay Touch Group Ltd (ASX: APT) to WiseTech Global Ltd (ASX: WTC).
As a reminder, Afterpay is the leading buy now, pay later business in Australia and WiseTech is a global logistics software business.
It has been a disappointing few months for Australian technology shares. Since their all-time highs in reporting season Afterpay and WiseTech are down 43% and 34% respectively.
The AFR has quoted Ms Liu, who manages around $1 billion for the Tribeca Alpha Plus fund, as saying some analysts are being too pessimistic and that it's currently a stockpicker's market because the right businesses will be able to deliver earnings growth.
She said she feels doesn't feel as comfortable about WiseTech because she doesn't get enough clarity and transparency in terms of earnings. As an aside, she also said that she likes Aristocrat Leisure Limited (ASX: ALL) for its ongoing growth, online gaming ventures, its un-demanding multiple and its US dollar earnings.
Afterpay is not the business it was a few years ago. It has since launched in the US and will soon be launching in the UK.
When Afterpay gave a business update in November 2018 it said that it had achieved more there in six months than in Australia in two years. It revealed underlying sales figure in the US of $115 million. At that point, to the end of October 2018, it had 300,000 consumers and over 900 retailers which had transacted with Afterpay.
Afterpay also said that the total gross merchandise volume (GMV) of retailers who were live at the time in the US was larger than the total online apparel market in Australia.
If Afterpay can reach the metrics in the US that it has Australia then Afterpay could be an excellent growth share from here. Some of the metrics I'm thinking of include Afterpay's 10% market share in Australia, its gross and net transaction loss figures and its positive Australian earnings before interest, tax, depreciation and amortisation (EBITDA) number.
Foolish takeaway
Despite the major fall of the Afterpay share price, it's still trading at 89x FY20's estimated earnings. But, there's a good chance that Afterpay may surprise the market positively over the next year or two, particularly if its UK expansion goes well.
But, Afterpay isn't the the type of investment I'm looking for my portfolio. I'd rather invest in a growing business with a lower price/earnings ratio.
