Well, 2020 has already shown it can deliver plenty of surprises. The slowdown in the Chinese economy caused by the coronavirus has forced many long-time market darlings to downgrade their profit outlooks for FY20.
The likes of WiseTech Global Ltd (ASX: WTC), Cochlear Limited (ASX: COH) and Altium Limited (ASX: ALU) have all slashed their revenue targets recently, causing their share prices to tumble as a result. This might leave many investors wondering where to look in the market for new growth opportunities.
So, with that in mind, here are 3 of my picks for ASX growth shares that could still take off this year.
Redbubble Ltd (ASX: RBL)
Redbubble operates on online marketplace for print-on-demand products like shirts, stickers and coffee cups, with designs made by independent artists who receive a cut of the sales.
The company’s share price took a hammering in December, dropping over 40% in a single trading day after it announced its growth numbers for the December quarter were much lower than anticipated. The company’s share price has rebounded slightly since then but is yet to really take off.
Compare the current situation to just a few months ago, when the company’s share price was trading at historic highs. Financial results for the September quarter had been incredibly positive: Redbubble had grown its marketplace revenue by 37% year-on-year on a constant currency basis to $70 million, while expanding its gross profit margin by 1.5 basis points to 37.9% and generating group operating earnings before interest, tax, depreciation and amortisation of $3.7 million.
These were solid numbers, and while it’s disappointing that Redbubble’s December growth numbers did not meet expectations, it may have been overly punished by the market. For those who like Redbubble’s business model and have been looking for a time to pick up shares, now might be the best opportunity.
LiveTiles Ltd (ASX: LVT)
LiveTiles helps companies design engaging intranet portals and collaborative online working environments. After an extended period of underperformance, during which time its share price slid to a 52-week-low of just $0.24, LiveTiles has finally shown some tentative signs of a rebound. With any luck, this could be the beginning of a turnaround for the company.
I’ve long been a fan of LiveTiles and it was disappointing to see its share price continue to head downwards even as it released decent results to the market. For the December quarter, annualised recurring revenues were up 130% year-on-year to $52.7 million. Quarter-on-quarter growth was split roughly evenly between organic growth and augmented growth through acquisitions.
But the real reason its share price has rebounded recently wasn’t those growth numbers. Instead, it was due to LiveTiles’ early February announcement that it was now an approved vendor with the US Government and the US Department of Defense. The US Federal Government is projected to spend over $127 billion on IT products and services in 2020, so this is an incredibly lucrative opportunity.
If this heralds the beginning of a recovery for LiveTiles there’s no better time to pick up shares, while it’s still hovering at the lower end of its 52-week trading range.
Pushpay Holdings Ltd (ASX: PPH)
Pushpay is an interesting company operating in a quite specific niche market: it is a fintech company that facilitates charitable church donations. It has grown quickly, and now claims to have close to 8,000 church customers using its payment platform.
Churches can sign up to use Pushpay’s mobile app technology, which provides them with the tools to create online “engagement centres”. These operate almost like social media platforms, allowing the church to send messages to members of its congregation.
It also allows church members to donate funds wherever and whenever they like, and provides churches with the ability to analyse donor trends and activity.
For the 6 months ending 30 September 2019, Pushpay generated US$57.3 million in revenues, and US$6.5 million in total net profit, representing year-on-year increases of 30% and 247%, respectively. Given those growth rates it’s no wonder that its share price has soared over 50% higher in just the last 6 months.
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Rhys Brock owns shares of Altium, Cochlear Ltd., LIVETILES FPO, and WiseTech Global. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. The Motley Fool Australia owns shares of and has recommended PUSHPAY FPO NZX. The Motley Fool Australia owns shares of Altium and WiseTech Global. The Motley Fool Australia has recommended Cochlear Ltd., LIVETILES FPO, and REDBUBBLE FPO. 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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