One of the hardest hit areas of the market during the coronavirus crisis has been the tech sector.
Since this time last month, the S&P/ASX 200 Information Technology index has lost approximately 44% of its value.
Whilst this is very disappointing for shareholders of these companies, it certainly is a gift for non-shareholders. I believe many of these tech shares have been oversold and are now trading at very attractive prices.
Three tech shares I would suggest investors consider snapping up when the market rebounds are listed below:
Appen Ltd (ASX: APX)
Appen is the global leader in the development of high-quality, human annotated datasets for machine learning and artificial intelligence. It has been experiencing very strong demand for its Content Relevance services from many of the largest technology companies. This led to the company smashing expectations in FY 2019 with revenue of $536 million and underlying EBITDA of $101 million. This represents a 47% and 42% increase, respectively, on FY 2018’s result. Whilst FY 2020 is likely to be softer because of the coronavirus outbreak, its long term growth outlook is as strong as ever thanks to the rapidly growing AI and machine learning market.
Megaport Ltd (ASX: MP1)
Megaport is an elasticity connectivity and network services company. Its service allows its customers to increase and decrease their available bandwidth in response to their own demand requirements. This means they don’t need to be tied to fixed service levels on long-term and expensive contracts. Demand has been very strong for Megaport’s services over the last few years and this has continued to be the case in FY 2020. In the first half of FY 2020, Megaport reported revenue of $25.9 million. This was an increase of 70% on the prior corresponding period. The good news is that with larger and larger amounts of computer infrastructure going from local servers to cloud providers, Megaport appears well-placed to continue its strong form in the 2020s.
NEXTDC Ltd (ASX: NXT)
Another tech share to consider buying when the market volatility eases is NEXTDC. It is Asia’s most innovative Data Centre-as-a-Service provider. NEXTDC is building the infrastructure platform for the digital economy, delivering the critical power, security and connectivity for global cloud computing providers, enterprise, and government. Due to the cloud computing boom, I believe demand for NEXTDC’s data centre solutions and connectivity services will increase significantly over the next decade and drive strong earnings growth as it scales.
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James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of MEGAPORT FPO. The Motley Fool Australia owns shares of Appen Ltd. The Motley Fool Australia has recommended MEGAPORT 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.