May proved to create some headwinds for our nations beloved WAAAX stocks. However, in gearing up for FY results, the tech companies’ announcements have rejuvenated investor confidence in their growth. If your portfolio held these five stocks, you’d be up 77.4% in the year to date:
- WiseTech Global Ltd (ASX: WTC): Up 58% YTD for a $26.92 close on Friday.
- Appen Limited (ASX: APX): Up 129% YTD for a $26.71 close on Friday.
- Altium Limited (ASX: ALU): Up 45% YTD to $31.32.
- Afterpay Touch Group Ltd (ASX: APT): Up 114% YTD to $24.17.
- Xero Limited (ASX: XRO): A 41% increase YTD to $59.29.
WiseTech jumped 10% last week after releasing its investor conference on Thursday morning, hitting its highest ever share price. The deck confirmed its guidance stated in early 2019, with FY EBIDTA expected between $100 – $105 million and revenue $326 – $339 million. Strong investor confidence in anticipation of its FY announcement was the driving force behind WiseTech’s share price last week.
The company also boasted metrics around customer acquisition. 38 of the top 50 global third-party logistics providers use WiseTech’s SaaS products in 130 different countries. All 25 of the top freight providers globally are also WiseTech customers.
Though it may have downplayed how trade wars would impact underlying sales, WiseTech’s strong cash balance after its $300 purchase plan gives it a tonne of fuel to invest in growth. It now operates at a PE multiple of 166x, making it one of the most expensive tech companies in the world.
Last month, there was a miscommunication with Appen announcing its guidance. The company announced its revenue targets to fall between $85 – $90 million, as established in March. Yet, Appen had been inexplicit about the cost of the Figure Eight acquisition. It could cost the company between $250 – $428 million, creating uncertainty around how this would impact the bottom line.
However, CEO Mark Brayan has now made it clear that the guidance is inclusive of Figure Eight’s acquisition cost, and the higher investment cost is offset by improvements in Appen’s core business.
Figure Eight has bolstered Appen’s addressable market to include smaller businesses.
Altium is scaling aggressively in a market where PCBs are growing ever more critical. It offers world-class products, most commonly known for Altium Designer, a PCB design software that drives 70% of Altium’s growth to date.
In 2012, Altium set aggressive growth targets. It set out to achieve PCB market leadership by 2020 and reach revenues of $200 million. Having achieved $78 million revenue in HY19, the company is on track to beat this goal. Altium also declared its goal to achieve market dominance (40%) by 2025, meaning it needs 100,000 Altium Designer subscribers.
According to Statista, the IoT market is expected to triple from $25 billion this year to $75 billion by 2025. Altium is set to benefit lucratively from this growth.
Afterpay is down 5% from highs of $28.46 last month. This was a result of political and global uncertainty stemming from trade wars that shook the market.
Nevertheless, the company’s international expansion in the UK and US has caused the APT stock price to rebound. In the US, Afterpay now has 1.5 million customers, adding 500,000 people to its customer base since March. It also signed up 3300 merchants on its platform over the same period. Afterpay also confirmed that it has launched its buy-now pay-later product in the UK.
Afterpay has been attracting 7,900 customers a day, a growth rate that shows that it is increasingly becoming the new normal for payments.
Xero is the leader in cloud accounting across Australia, New Zealand, and the UK. It has growth 62% year-on-year in North America, making headwinds in Hong Kong, Singapore and even South Africa.
Its UK growth has been a highlight. There were net additions of 151,000, driving almost two-thirds of the overall group increase. This was cited to be a result of positive market timing.
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Audrey Thehamihardja has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Altium, WiseTech Global, and Xero. The Motley Fool Australia owns shares of AFTERPAY T FPO and Appen Ltd. 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.
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