With the coronavirus crisis continuing to wreak havoc on global equity markets, many former growth companies have seen their valuations slashed.
This is for a variety of reasons. The short-term economic outlook has obviously soured significantly, as retailers across the world close their doors, public events are cancelled, and international supply chains are disrupted. Additionally, short-term investors, spooked by the current situation, are taking their profits off the table and seeking the safety of cash over equities. And finally, as global unemployment rises, many ordinary people no longer have the resources available to participate in the share market and need extra liquidity to support their day-to-day lives.
This isn't to say that you should profit from other peoples' misfortunes. But rather, it's to illustrate that many companies are currently well oversold in the market. While the scale of this crisis seems overwhelming at times, it's important to remember that markets recover. It's difficult to say how long the impacts of the pandemic will continue to be felt, but as social restrictions relax in future, the economy will experience a strong rebound.
So don't panic, remain optimistic and keep a long-term view. There are plenty of companies with strong fundamentals, loyal customers and great growth prospects that will continue to deliver strong returns to shareholders once the crisis is over.
Appen Limited (ASX: APX)
The Appen share price is pretty volatile at the best of times, but the last month has been especially rocky. Since mid-February, its share price has slid over 27% lower to $19.80 as at the time of writing.
The company specialises in data analysis using artificial intelligence and machine-learning, helping clients in fields as diverse as fraud detection, car navigation and medical imaging speed up and automate processes.
In a recent update on its response to the coronavirus, the company stated that it was reasonably uniquely poised to deal with the unfolding crisis, given many of its employees already work remotely.
Altium Limited (ASX: ALU)
Since climbing to a 52-week high of $42.76 back on 17 February, ASX software company Altium has slid over 37% lower to $26.75 as at the time of writing.
The company specialises in the development of sophisticated software that aids with printed circuit board (PCB) design. PCBs are present in just about all electronic devices, and Altium services customers in as varied industries as automotive, education and consumer electronics.
In its first half results, Altium reaffirmed its full year revenue guidance of between US$205 million and US$215 million, but it did flag that it expected to land at the lower end due to impact the coronavirus was having in China.
Afterpay Ltd (ASX: APT)
The buy now, pay later ASX fintech has been absolutely hammered over the last month. Since posting a fresh 52-week high of $41.14 on 19 February, its share price has plummeted more than 75% to just $9.90 as at the time of writing.
And it's no mystery why. The short-term consumer outlook has darkened significantly. Retailers are closing their doors, and many people are understandably electing to delay discretionary spending until the true extent of the crisis is known.
In a recent shareholder letter, CEO and Managing Director Anthony Eisen reassured investors that Afterpay had not yet experienced significant impacts from the coronavirus, and that its balance sheet was strong enough to ride out any short-term uncertainty.
NextDC Ltd (ASX: NXT)
Compared to these other tech companies, data centre operator NextDC has held up surprisingly well. It hasn't been immune to market volatility, but its current price of $7.29 is only 16% off its 52-week high of $8.65 recorded on 11 March.
NextDC is victim to the same supply-side disruptions as the broader market: restrictions on travel especially will hinder the company's ability to do business. But NextDC is one of the few companies for which the current climate actually provides some tailwinds. As an increasing number of global customers transition to working remotely over the coming months, these new digital ways of working will increase demand for NextDC's infrastructural support.
As evidence of its bullish outlook, the company recently reaffirmed its full year revenue guidance of between $200 million to $206 million for FY20, making it definitely one to watch in the coming months.
