With growth companies operating on high-flying price-to-earnings multiples, their stock prices are highly sensitive to any company-specific or market wide news.
These three stocks have had a rather tough month, which could open up buying opportunities to keen investors. Here’s why you should consider these ASX shares this month.
Since hitting its peak of $31.42 at the end of July, Appen Ltd (ASX: APX) has since seen its share price slide 25.52% to $23.40 as at time of writing.
This has occurred in the aftermath of its HY announcements, where its impressive numbers beat analyst expectations. Key highlights include a 60% increase in revenue to $245.1 million and net profit after tax (NPAT) up by 67% to $29.6 million on the year prior. Similarly, its Relevance segment revenue was up 48%, while Speech and Image segment revenue lifted a staggering 85%.
However, this was overshadowed by questions around its Figure Eight acquisition. Analysts have commented that fewer contract renewals and delayed deals occurred in the second quarter of the year as a result of this ‘distraction’.
CEO Mark Brayan described Figure Eight “as a new growth pillar for the Company”, and time will tell if this will be fulfilled. Nevertheless, the company is trading at more than a 20% discount since last month and could be a fantastic buying opportunity.
The Elixinol Global Ltd (ASX: EXL) share price is currently trading for $2.23, which is 20% lower than this time last month.
In the first half of FY19, the US CBD dietary supplement company reported a 19% growth in revenue to $18.3 million, however this is much less than the $26.6 million reported in the last half of 2018. Elixinol also announced a $9.8 million loss, attributed to its spending spree to develop new products, drive marketing spend and further R&D costs.
However, it may not all be bad news. These new products have potential for strong market fit and, given Elixinol’s marketing expenditure, this should translate into a larger customer base in the months to come.
The digital travel business, Webjet Limited (ASX: WEB), is trading 8% lower than last month, with the Webjet share price sitting at $12.36 at time of writing. Webjet and its competitors like Flight Centre Travel Group Ltd (ASX: FLT), have all suffered in this tumultuous year, with Webjet’s FY results reflecting the repercussions of a decline in demand for domestic and even business travel.
However, Webjet’s earnings reflect record metrics across the board. Total transaction value grew 27% to $3.8 billion, revenue was up 26% to $366.4 million and NPAT shot up 46% to $81.3 million. A key driver to the company’s growth has been its B2B segment, WebBeds, which experienced a 59% increase in bookings, resulting in a 148% jump in earning before interest, tax, depreciation and amortisation (EBITDA).
However, its weak share price is most likely due to its questionable Thomas Cook acquisition. Thomas Cook’s performance guidance was more than halved to $150–200 million, which also drove Webjet’s overall FY20 expectations down to $27 to $33 million, rather than its initial $40 million.
While I’m still keeping this company on my watchlist, I think I’ll be waiting for more news on the Thomas Cook situation before considering a buy at this price.
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Motley Fool contributor Audrey Thehamihardja has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Appen Ltd. The Motley Fool Australia has recommended Webjet 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.