Investors are always chasing high returns, often without acknowledging the potential risks involved for the business and how these risks might impact its growth.
Here a closer look at 3 ASX growth shares that have the potential to make it or break it with their products and services.
1. Sezzle Inc (ASX: SZL)
Sezzle is a US-based buy-now, pay-later (BNPL) platform. The company floated on the ASX on 30 June 2019 at an offer price of $1.22 and has a market capitalisation of just over $200 million. It has built strong momentum across key growth metrics such as active merchants, active customers and merchant sales.
In its Q3 update, Sezzle highlighted phenomenal quarter-on-quarter growth with active merchants growing 48.7% to 7,507, active customers increasing 49.9% to 644,609, underlying merchant sales up 64.2% to US$41.9 million and underlying merchant fees up 68.9% to US$3.6 million.
Sezzle has exciting developments on the horizon with its Visa CyberSource partnership. Over 400,000 businesses use CyberSource solutions and Sezzle expects investors to see the positive impact in merchant sales in upcoming quarters. Sezzle is also expanding its geographic footprint with an expansion into Canada, where the business is experiencing strong early customer sign ups.
Cash in the bank is a very important metric when observing these small but rapidly growing companies. Sezzle has US$27.2 million cash, which enables flexibility to invest in further growth initiatives.
Sezzle does not by any means lag behind its larger peers such as the Afterpay Touch Group Ltd (ASX: APT) or Zip Co Ltd (ASX: Z1P). However, sentiment and regulatory concerns could easily derail these growth stories.
2. PointsBet Holdings Ltd (ASX: PBH)
Corporate bookmaker PointsBet has just initiated an enormous $122.1 million capital raising after its $75 million IPO back in June. Investors will have mixed feelings for a raise of such magnitude. However, the company wants to be fully cashed up to leverage the enormous opportunity in the US. PointsBet holds licenses across many US states that are pending legalisation of sports betting.
Proceeds raised under the capital raising will be used to support marketing and client acquisition, technology and product development, market access and government licensing fees and balance sheet flexibility.
The company also provided an investor update for the quarter ending 30 September 2019. One of the most compelling statistics in this update was the company’s record market share in New Jersey of 6.7%, compared to 5.4% just 3 months ago.
PointsBet could become a market leader with many valuable licenses in the US sports betting market. However, it will require a significant amount of capital and clean execution to pave way for its growth story.
3. Galaxy Resources Ltd (ASX: GXY)
The dwindling lithium spot price continues to beat down lithium miners. Investors may need to sit on their hands a little longer for a lithium opportunity/turnaround. However, I believe Galaxy Resources is the name that will capitalise the most on any reversal or good news.
In the company’s Q4 update, it saw production volume at midpoint of its production guidance. Its flagship site, Mt Cattlin, saw a production unit cash cost of just US$387, which makes it one of the lowest cost lithium concentrate operations globally.
I believe a combination of industry leading production costs and its $169 million cash in the bank (as of September) allows Galaxy to survive through this lithium trough but be fully leveraged to run north when prices recover.
5 stocks under $5
We hear it over and over from investors, "I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I'd be sitting on a gold mine!" And it's true.
And while Altium and Afterpay have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $5 a share!
*Extreme Opportunities returns as of June 5th 2020
Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Pointsbet Holdings Ltd and Sezzle Inc. 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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