WAAAX shares outperformed in the April share market recovery. While the S&P/ASX 200 Index (ASX: XJO) is up 15% from March lows, WAAAX shares are up between 32% and 227%. We take a look at why WAAAX shares are performing so strongly.
WiseTech Global Ltd (ASX: WTC)
Shares in WiseTech are up 70% from their March lows. The global logistics provider saw its share price jump in April when it reaffirmed its FY20 guidance.
The business traded in line with guidance in the March quarter. Growth in revenue, cash generation from operations, and further onboarding of new users substantially offset reductions from COVID-19.
Guidance for the full year is for revenue in the range of $420 million to $450 million with growth of 21% to 29%. Earnings before interest, tax, depreciation and amortisation (EBITDA) is expected to grow by 5% to 22% to reach a range of $114 million to $132 million.
While the business remains resilient, WiseTech believes COVID-19 will continue to impact many economies and global supply chain movements. Demand for technology such as CargoWise is expected to continue to increase, but the logistics industry and the economies it services face substantial uncertainty.
WiseTech's net cash position was $230 million at 31 March. Its established $190 million debt facility remains undrawn with a further $200 million accordion facility in place. CEO Richard White said, "we will take necessary actions to prioritise critical technological development, be highly cost efficient, safeguard our financial strength and continue to build our competitive position".
Afterpay Ltd (ASX: APT)
At the time of writing, Afterpay shares are up 227% from March lows with the buy now, pay later provider reporting March was its third-largest underlying sales month on record. Underlying sales in the March quarter increased 97% compared to Q3 FY19.
Afterpay reported underlying sales of $7.3 billion for the year to date, growing at 105% compared to the prior corresponding period (pcp). The mature Australia and New Zealand region continues to be highly profitable with positive underlying cash flow. Estimated profitability on a year-to-date basis has increased relative to H1 FY20 and for the month of March relative to the pcp.
Healthy growth in merchant and customer numbers was recorded during the March quarter. Active customers grew to 8.4 million, up 122% on the pcp, while merchant numbers grew to 48,400 globally, up 78% on the pcp.
Afterpay has made pre-emptive adjustments to risk settings which have had a positive impact on loss performance lead indicators in the second half of March and early April. The company has a strong balance sheet and liquidity position, meaning there should be no requirement to raise capital in the foreseeable future.
Altium Limited (ASX: ALU)
Altium shares have gained 33% from their March lows. The company says it is well-positioned in the current environment, with electronic design anticipated to be relatively resilient to unfolding market conditions.
Altium confirmed its strong operational and market position in April but chose to withdraw its FY20 earnings guidance due to the evolving nature of COVID-19 and uncertainty regarding its direction. Nonetheless, management remains firmly committed to its aspirational market leadership target of US$200 million revenue in FY20.
Altium says its model is robust and it is well diversified across industry segments and regions worldwide. Marketing and direct selling are conducted via the internet and telephone.
Altium is accelerating the roll-out of its new cloud platform Altium 365 as worldwide demand is growing rapidly for cloud-based collaborative tools.
Altium 365 is a core enabler of the company's strategy of industry transformation through market dominance. It is particularly relevant in current circumstances as it allows engineers to work from anywhere and connect with anyone.
Appen Ltd (ASX: APX)
Appen shares have regained 47% from March lows with the artificial intelligence company reiterating its guidance in mid-April. Full-year underlying EBITDA is expected to be in the range of $125 million to $130 million.
Appen maintains a healthy balance sheet with cash resources in excess of $100 million. The company's global crowd workers are ideally situated, working from home as usual. Current circumstances may improve the company's 2020 performance by increasing available crowd workers.
A pandemic-led increase in the use of search, social media and e-commerce platforms could also enhance Appen's performance, as could the weaker Australian dollar. Performance could be dampened by a slowdown in digital spending, interruptions to global hardware supply chains, and suspension of face to face projects such as audio data collection.
In FY19, Appen saw total revenue increase by 47% to $536 million. Appen has delivered annual compound growth in revenue of 60% over the past 5 years. Organic underlying EBITDA grew 51% in 2019 to $107.3 million.
Appen's strategy focuses on achieving scale in its global crowd-based workforce and the volume of data generated. As arguably the largest global provider of data for machine learning, Appen is strengthening its revenue base by extending the range of customers and expanding into new geographies.
Xero Limited (ASX: XRO)
At the time of writing, Xero shares are up 32% from their March low. Xero provides cloud-based accounting software to small and medium enterprises (SMEs). Given its customers are SMEs, many have been significantly impacted by COVID-19. Nonetheless, they will still have tax obligations to attend to which provides the business with a degree of resilience.
Xero is operating in an industry where structural growth is being driven by regulation and a broad-based shift to the cloud. Increased remote working is also likely to hasten this shift to the cloud. This could push more potential clients towards Xero's solutions.
Xero releases its full-year financial results this month which will provide more clarity on how it has been impacted by COVID-19. The company was well-positioned prior to the crisis with a self-funding business model and strong balance sheet.
Xero has established itself in a dominant software-as-a-service position in Australia and New Zealand. It also has a growing presence in the UK and US. Prior to the pandemic, Xero was seeing healthy growth in subscriber numbers. While this may slow in the near term, long term structural factors still work in Xero's favour.
