The ASX 200's leading tech shares have taken investors for a volatile run this November. From short seller attacks, share price downgrades and valuation concerns to earnings upgrades, outstanding financial results and US tech shares pushing higher – they have been through it all.
To recap
The WiseTech Global Ltd (ASX: WTC) share price has continued to struggle to gain momentum after recent short-seller attacks. While the company' AGM reconfirmed its FY20 guidance, this did not ignite investor confidence and the share price has remained relatively flat for the past 5 trading sessions. WiseTech reiterated its FY20 revenue growth of 26–32% and EBITDA growth of 34–42%.
Afterpay Touch Group Ltd (ASX: APT) provided the market with an update on its Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) audit. The report was positive and Afterpay has advised that it fully accepts and is actioning all recommendations from the Auditor.
Appen Ltd (ASX: APX) surprised the market last week with an earnings upgrade, marking Appen's 13th earnings upgrade since inception. This update highlighted that the company's full year underlying EBITDA is estimated to be in the range of $96–99 million, compared to its previous guidance of $85–90 million. Appen's improved earnings forecast is driven by increases in monthly revenues and margins, largely from existing projects with existing customers.
Altium Limited (ASX: ALU) has not released any market sensitive news since the announcement of its full year earnings back in August. The share price is within 10% of its all-time highs.
The Xero Limited (ASX: XRO) share price soared to a record high of $79.99 after the announcement of its half yearly earnings results. The company announced a 32% increase in operating revenue while its global subscriber base soared 30% to surpass the 2 million mark.
Which WAAAX stock to pick?
I would personally avoid WiseTech, as its peers such as Appen and Altium can offer similar growth capabilities at a much cheaper valuation.
Xero, on the other hand, has delivered an outstanding half-year result, but its share price has jumped by more than 18% in the past 5 trading sessions. I see the share price heading higher, but buying at all-time highs might not offer optimal risk/reward.
Based off Appen's revised full-year guidance, the company expects EBITDA to grow between 34–38% compared to FY18. I believe Appen and Altium have similar growth capabilities within the 30–50% range, while both are trading at a price-to-earnings ratio of between 50–60. Altium has set an ambitious long-term target, which includes hitting US$200 million revenue by 2020, 100,000 Altium Designer subscribers by 20205 and an aspirational revenue goal of US$500 million in 2025. Both companies are cutting-edge, high quality businesses that should deliver solid shareholder return in the medium-long term.
Afterpay investors have experienced a wild ride following its share price tumbling almost 30% from mid-October to early-November. The share price has now soared on 2 crucial announcements – a business update and AUSTRAC update.
I believe Afterpay is the riskier investment, but one that could provide investors with better returns than Appen and Altium. Its business update demonstrated excellent growth in all key metrics from customer acquisition, merchant growth and gross merchandise value across all key geographies.
