The Australian tech sector is immature compared to the much larger US tech market. However, a broad range of interesting ASX tech shares is now emerging.
2 ASX tech shares to buy and hold for the long term
Local data centre services provider NextDC has evolved significantly over the past decade. It is now Australia’s largest locally based data centre operator. NextDC’s customer base has grown at a very impressive compound annual growth rate (CAGR) of 21% over the past 4 years. The local data centre operator now rivals some of its larger global competitors such as Equinix and Global Switch, in terms of the size of its data centre footprint throughout Australia.
Strong growth in its customer base is reflected in the company’s recent share price growth. The NextDC share price has grown from $6.49 a year ago to now be trading at $12.03, an increase of 85%.
I am confident that there is potential for further growth for the NextDC share price in the years to come. NextDC is continuing to build newer and more energy-efficient Tier IV data centres, which is likely to lead to growing margins and higher recurring revenues.
Appen has evolved over the past few years to become a global leader in providing data for machine learning and artificial intelligence (AI). Clients include global tech giants such as Apple and Alphabet.
Like NextDC, Appen has experienced strong share price growth over the past year, particularly over the past few months. The Appen share price risen from to $17.14 in mid-March, to now be trading at $38.09 at the time of writing. In a recent update, Appen informed the market that there no been any major impact to its business operations during the coronavirus pandemic so far.
I believe that there is potential for more strong growth in the years ahead for the Appen share price. The global demand for AI products and machine-learning markets is only likely to surge higher.
NextDC and Appen are 2 quality ASX tech shares that I would be confident to buy and hold for the long term. Both companies have strongly established market positions in their respective niches. I believe that this is likely to lead to strong revenue growth over the next few years, which in turn is likely to flow through to above average shareholder returns.
These 3 stocks could be the next big movers in 2020
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Motley Fool contributor Phil Harpur owns shares of Appen Ltd and NextDC Ltd. The Motley Fool Australia owns shares of Appen Ltd. 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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